Well interesting day yesterday.
Client situation
PPOR turns to IP
IP rented out until sold
PPOR main residence absence provisions used for 6 years.
First confusion for client was whether the cost base was the market value on the date 6 years after they moved out i.e. the end of the 6 years after the maximum time allowed to use the absence provisions or the market value on date rented out. Confirmed with client that s 118-192 states that it is market value at 'income time'
Now next interaction was the apportionment of the capital gain. Example 71 in the ATO Capital Gains Tax Guide uses a denominator where the number of days was the total ownership period i.e. from beginning of acquisition to sale.
The bottom line is supposed to be 'ownership period' (section 118-195).
Ownership period is the period in which you have an ownership interest (which is why it is settlement to settlement) (section 118-125).
You are taken to have acquired the ownership interest at the 'income time' for its market value (section 118-192): 'You are taken to have *acquired the *dwelling or your *ownership interest at the income time for its *market value at that time.'
So the denominator should be time from first used to produce income to sale. Rang NTAA and discussed with them and they agreed ATO factsheet is wrong. Apparently 2012 prior are ok it is the 2013 factsheet which has an incorrect example
Heaven help us if the ATO can't even get their guides right.
Client situation
PPOR turns to IP
IP rented out until sold
PPOR main residence absence provisions used for 6 years.
First confusion for client was whether the cost base was the market value on the date 6 years after they moved out i.e. the end of the 6 years after the maximum time allowed to use the absence provisions or the market value on date rented out. Confirmed with client that s 118-192 states that it is market value at 'income time'
Now next interaction was the apportionment of the capital gain. Example 71 in the ATO Capital Gains Tax Guide uses a denominator where the number of days was the total ownership period i.e. from beginning of acquisition to sale.
The bottom line is supposed to be 'ownership period' (section 118-195).
Ownership period is the period in which you have an ownership interest (which is why it is settlement to settlement) (section 118-125).
You are taken to have acquired the ownership interest at the 'income time' for its market value (section 118-192): 'You are taken to have *acquired the *dwelling or your *ownership interest at the income time for its *market value at that time.'
So the denominator should be time from first used to produce income to sale. Rang NTAA and discussed with them and they agreed ATO factsheet is wrong. Apparently 2012 prior are ok it is the 2013 factsheet which has an incorrect example
Heaven help us if the ATO can't even get their guides right.