CGT advice for a house with granny flat?

[susanne35]

Hi there - I'm new here but have been reading some of the good advice on these forums and was hoping someone may be able to help.

I own a house with a granny flat which I need to sell to reduce my mortgage on my now primaruy residence in a different state.

Info: House bought in Aug 2001. I lived upstairs up to July 2006 and rented downstairs unit (50% of dwelling) during this period, following which I rented out the whole of the house and it remained rented up to now. Tenants vacate next week & house will be listed for sale. In Dec 2008, I bought another house as my primary residence.

Round figures I paid around $120k and will look at selling for $450k.

Can I claim a part or all of it for a period as my primary residence? How much roughly would my CG liability be?

Any advice or help would be greatly appreciated. Thanks in advance!

 

[Terryw]

I believe that only the portion of the property you lived in will be exempt for CGT for this period. The granny flat portion would attract CGT. You can't claim the main residence exemption because you were living in the property at the time.

 

[kaiseriqbal]

Hi Terry,

Say a person purchased their main residence and lived in it for a year. They then built a granny flat which they rented out.

Is that person entitled to the 6 years main residence CGT exemption and if he/she sold the property within 6 years of building the granny flat, will there be any CGT?

How is the above different from moving out of the property and renting it out completely and still claiming it as a main residence? In this scenario, there should be no CGT, i think.

 

[Terryw]

Hi Terry,

Say a person purchased their main residence and lived in it for a year. They then built a granny flat which they rented out.

Is that person entitled to the 6 years main residence CGT exemption and if he/she sold the property within 6 years of building the granny flat, will there be any CGT?

How is the above different from moving out of the property and renting it out completely and still claiming it as a main residence? In this scenario, there should be no CGT, i think.

Hi Kaiser

No, it wouldn't be exempt from CGT because the property was used for income producing purposes. You cannot claim the absence from main residence exemption either, because you are no absent.

CGT would apply on the portion rented out.

 

[kaiseriqbal]

so it could possibly be better to move out and rent yourself, which would allow you to rent the whole property (granny flat + main house), especially if there will be large capital gains in the 6 years?

 

[Terryw]

yes, possibly.

 

[susanne35]

Thanks for the advice... it's all still a little fuzzy! So considering I moved out of the house completely about 4 years ago and if I sell it now, would that make it CGT free? Or still on CGT free for the portion I lived in?

 

[Terryw]

If you rented out portion while you where in it, then CGT would probably apply. After you moved out you MAY be able to claim a CGT exemption for this period, but this would depend on whether you are claiming another property as your main residence during this period.