Capital Gains Tax... Principal Residence

W

WebBoard

Guest
From: Iona 2


My daughter rented a property for 4 years which came up for sale and she purchased it. She sold it two weeks prior to owning it for 12 months. Is she liable for capital gains tax... it was certainly her principal place of residence for almost 5 years.
I am anxious on her behalf.
Regards,
Iona
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1
From: Terry Avery


Iona if your daughter lived in the house then it is her principal place of
residence and she does not have to pay capital gains tax.

The 12 months rule only applies to investment properties, shares,
collectibles and so on. Things which are investments are taxable.

Hope this puts your mind at ease.
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.1
From: Sergey Golovin


Iona,

She rented someone else’s property for 4 years? Is it right? She did not own that property?

If it is the case, then she owned here (not someone else’s, but here - regardless if it is the same address or not) place only for 12 month? Is it right?

She can stay there as longer as she likes and it is no Capital Gain Tax for principal place of residency. It goes even bit further then that - she can keep it and rent it out for as long as 6 years and not pay CGT on sale of that property. Only after that 6th year she has to come with payments if any (if she made gain - above market value) if she sales that property. Otherwise she keeps forever and pays no CGT (as longer as she does not want to sell it).
It can be Capital Gain or Capital Loss. If it is loss you do not pay tax. Gain will occur if you sells above market value.

Hope it helps.

Serge.
 
Last edited by a moderator:
Reply: 1.1.1
From: Paul Zagoridis


On 8/9/01 10:41:00 AM, Sergey Golovin wrote:
>Gain will
>occur if you sells above
>market value.

Market value does not come into it.

If sold for more than it cost then it is a gain. CPI adjustments are no longer made.

There are adjustments to the "cost" i.e. the written down value is purchase price plus stamp duty, legals and other capital expense less accumulated depreciation. If you sell for more you have a gain. Sell for less and you have a loss.

So it is possible to have a real loss and still pay CGT.

Paul Zag
Dreamspinner
Oz Film Biz is at
http://www.healey.com.au/~paulz
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.1.1.1
From: Sergey Golovin


Thanks Paul,

Oh well, sorry Iona we did try, but as you can see it is ever changing world out there.

Tell your daughter do not get too angry.
Tell her that Federal Election going to be held in 3-month time, end of November beginning of December.

Serge.
 
Last edited by a moderator:
Reply: 1.1.1.1.1
From: Dale Gatherum-Goss


Hi

No, the sale is tax free because it was her principle residence. It does not matter how long she owned it, providing that she can prove that she did in fact live there. This includes having her name on the electoral role, and having the utilities connected in her name.

Iona, there is no tax on this sale, whatsoever.

Dale
 
Last edited by a moderator:
Reply: 1.1.1.1.1.1
From: Mike .


Hi Iona,

You said: "... it was certainly her principal place of residence for almost 5 years."

Unfortunately, the 4 years that your daughter rented doesn't count towards main residency status since she was not the owner of the dwelling at this time. However, no CGT is due upon sale since she would have plenty of evidence to show that it was her main residence for nearly 12 months, which is sufficient.

Hi Paul,

You said: "CPI adjustments are no longer made."

This is the case for assets acquired on or after 21 Sept 1999. For assets acquired before this date, the Indexation method may still be employed if it gives you a better result than the new Discount method.

Regards, Mike
 
Last edited by a moderator:
Reply: 1.1.1.1.1.1.1
From: Paul Zagoridis


On 8/11/01 9:56:00 AM, Mike . wrote:
>
>Hi Paul,
>
>You said: "CPI adjustments are
>no longer made."
>
>This is the case for assets
>acquired on or after 21 Sept
>1999. For assets acquired
>before this date, the
>Indexation method may still be
>employed if it gives you a
>better result than the new
>Discount method.

Hi Mike,

You are of course very right. The indexation option is still worth considering for many people.

As 21 September 1999 recedes, it be less relevant. Given the property was sold after less than 12 months and the question is coming up now, I assumed it was purchased after 1999.

Paul Zag
Dreamspinner
Oz Film Biz is at
http://www.healey.com.au/~paulz
 
Last edited by a moderator:
Reply: 1.1.1.1.1.1.1.1
From: Mike .


Hi Paul,

You said: "Given the property was sold after less than 12 months and the question is coming up now, I assumed it was purchased after 1999."

Sorry to be pedantic, but the issue of Indexation is spurious in Iona's case since the issue concerns a principal place of residence. Your original comment: "CPI adjustments are no longer made." was in reference to Sergey's hypothetical that Iona's daughter rent her place out for more than 6 years concurrently, thereby qualifying for CGT upon sale.

I know this post is not even worth 2 cents, so I'm happy to delete it, if you like.

Regards, Mike
 
Last edited by a moderator:
Reply: 1.1.1.1.1.1.1.1.1
From: Paul Zagoridis


Actually, Mike please don't delete your post. It was fine, as was the earlier one with the exact dates (saved me having to look them up).

I'll have to check my reply to you as I basically wanted to say, "Yep you are soooo right". Please keep posting especially when you have the details. Thanks.

Paul Zag
Dreamspinner
Oz Film Biz is at
http://www.healey.com.au/~paulz
 
Last edited by a moderator:
Top