Capital improvements & CGT on IP to PPOR

Hi there,

Plan:
- Purchase an IP and 2 years later move into said property making it my PPOR.
- Make improvements to the property (i.e. new kitchen) after the property becomes my PPOR,

Question: Are the invoiced Capital Improvements costs incurred in the 'PPOR years' able to be added to the cost base to reduce CGT when eventually sold?

In other words, for the years or period of time when the property is not rented and it is my PPOR, do capital improvements offset the CGT payable?
Or is it only applicable to the period of time when the property is rented...?

Thanks for your help in advance...
 
I think I found my answer with a bit more thorough googling.

Yes the renos will be added to the cost base. And it covers any period
you live there, basically any time that the property is not producing
income because the only restriction is that the expense has not otherwise
been claimed as a tax deduction. Other things you need to consider are
any cost associated with the property. The legislation specifically
includes maintenance this is a gold mine. Consider anything to do with
looking after the house such as cleaning it and mowing the law. Get out
your woollies dockets look for disinfectant and other cleaning materials.
It is really only limited by your imagination. If it has anything at all
to do with the house, keep a record. It is not just for the whole time you
live there. It is basically anything that you have not otherwise claimed
as a tax deduction. It is just that these are most likely to arise when
you are living there. Reference Section 110-25(4) ITAA 1997
Found here, http://www.bantacs.com.au/QandA/index.php?xq=314
thanks Julia!

Let me know guys if you have thoughts to the contrary...
 
Does this mean interest paid on the mortgage of the house can be added to the initial purchase price...quote.....

There is one situation to do with options in which the incidental costs relating to the CGT event are modified: see section 112- 85.

(4) The third element is the costs of owning the * CGT asset you incurred (but only if you * acquired the asset after 20 August 1991). These costs include:

(a) interest on money you borrowed to acquire the asset; and

(b) costs of maintaining, repairing or insuring it; and

(c) rates or land tax, if the asset is land; and

(d) interest on money you borrowed to refinance the money you borrowed to acquire the asset; and

(e) interest on money you borrowed to finance the capital expenditure you incurred to increase the asset's value.









Damn these things hurt my head trying to understand it all.



Also, it says "get out the woolies dockets for disinfectant etc". Do you need to keep the dockets? We all know they fade and are a pain to scan / copy. Can I just keep a notebook and write date, description, cost??

thanks for any advice
 
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