Capital Gains Tax

[turfy77]

I bought my property in 2001 for $120000, spent $70000 renovating it (total $190000 spent) and its now worth $500000. It was my principle residence for 11 years. Last year I bought a new house and moved into it and have been renting out the property ever since.
I understand that if I had of sold it last year I wouldn't of paid any capital gains tax (CGT), However I dont want to sell the original property as its a good rental but I'm worried that the $310000 profit I made off it will be taken away by CGT. for example if I rented it for 11 years and I lived in it for 11 years then 50% of the profit will be taken away from me when I sell. I dont think housing prices will go up as much as they did 5-10 years ago so that big profit I made in this period will taken away from me the longer I keep the house. If house prices stay the same for the next 11 years am I able to get a house evaluation now and keep the profit I made in the first 11 years and pay no CGT if I sold it in 11 years time? (Hope that makes sense)

 

[wylie]

I think you can get a valuation (or an appraisal with three comparable properties might suffice - do check this) as at the date it became an IP and that is the starting point or cost base. Any profit after you bought a new PPOR starts from this date.

This is my understanding anyway.

 

[geoffw]

Also you don't lose half of your profit. Half of your profit gets added to your income and you pay tax on the new income. So maximum loss will be 25%.

 

[GaryT]

Obtain a valuation on the old property as at the date it first earned income. This becomes your cost base for CGT purposes.

You can choose to keep the old property as your PPOR for up to 6 years for CGT purposes. Alternatively you can choose your new property as your PPOR. You can only have one PPOR. When you sell one of the properties then do the sums and choose accordingly.

The capital gain on the original property is calculated in very simple terms as sale price less new cost price (as at date it first earned income). If you choose to keep this as your PPOR (for up to 6 years) then the capital gain is apportioned.

If you do choose the old property as your PPOR, then your new property will be subject to CGT when sold on a proportional basis. You can add any and all maintenance costs and interest etc to the cost base.

Assuming the properties are kept for at least 1 year then you receive a 50% discount on the calculated capital gain with this amount added to any other taxable income in the year that you sign the contract for sale.