CGT exemption on quick sale of multiple PPOR

[albanga]

Hi All,
My mate has a scenario I was not too sure about.
Has Current PPOR (always lived there) and wants to sell, he would be CGT exempt.
He has another place lined up that he believes is under valued that is OTP due to finish construction in June and is considering purchasing it.

Let us say he was to purchase it and also claim it as PPOR (6 month rule) and once completed move in. How long would he need to then live there for before selling to again avoid CGT?

The ATO makes no mention of a timeframe, except "ownership period"? Is this usually 12 months? And if so would that mean he would only need to live in it for 6 months before being able to sell?

Somerthing is telling me however that the ATO may look at this a bit different though given the quick flip involved?

 

[Terry_w]

look carefully at the legislation s118-140. No minimum period is listed for the second dwelling. but other provisions could apply as it sounds like the purpose is profit driven.

 

[albanga]

look carefully at the legislation s118-140. No minimum period is listed for the second dwelling. but other provisions could apply as it sounds like the purpose is profit driven.

Thanks Terry
That was my initial thought that the ATO may take a stance the purpose was profit driven. I would imagine after 12 months though that they You may be ok.
A lot can happen in a year that may cause you to sell the place you just purchased.

 

[Scott No Mates]

moving from one to the other as a PPOR may make the first subject to CGT when he gets around to selling it. It may also make him liable for land tax as well.

 

[Paul@PFI]

Thanks Terry
That was my initial thought that the ATO may take a stance the purpose was profit driven. I would imagine after 12 months though that they You may be ok.
A lot can happen in a year that may cause you to sell the place you just purchased.

Mere realisation or profit seeking ?

I might argue that if a genuine claim to a main residence is fully evident then that's not a issue. There is no precise time frame and an exempt gain is an exempt gain. Its akin to the absence rule which requires you have resided...It can be as short as a day or a few days. But each taxpayer may need to substantiate their claim. For example a new job interstate....No sweat. Its not uncommon for people to buy a PPOR and have a lifestyle change and move soon after - another suburb, interstate or o/seas. Most if not all taxpayers desire that the value of the MR is increased through equity. In the absence of debt reduction the change in value is a normal process and a expectation of most home owners.

The problem created by selling PPOR #2 is then the person has no PPOR and must pay entry costs such as legals and duty to get PPOR 3. So making $50K tax free wont mean much when the next property results in $45K duty and buying and relocation costs etc.

The big catch is the sale of the PPOR must occur after he moves into PPOR 2 and also within 6 months. Also watch for land tax issues. Land tax isn't quite as generous. ie a requirement you must have resided for at least 6 months before the taxing date of land tax still applies to PPOR. Depending on value of land and other property owned may not be a concern.

 

[albanga]

Like always Paul thanks for the detailed clarification. Is there any particular site good for reading up on Victorian land taxes? I have a feeling he would be in trouble as the cost of the 2 proposed PPOR's would be about 1.7mil.

 

[Terry_w]

Like always Paul thanks for the detailed clarification. Is there any particular site good for reading up on Victorian land taxes? I have a feeling he would be in trouble as the cost of the 2 proposed PPOR's would be about 1.7mil.

Try the SRO and the land tax act

 

[Paul@PFI]

Like always Paul thanks for the detailed clarification. Is there any particular site good for reading up on Victorian land taxes? I have a feeling he would be in trouble as the cost of the 2 proposed PPOR's would be about 1.7mil.

Each state Office of State revue has a fair website. Often you will need to read more detailed rulings etc. Google will assist eg google - Vic OSR land tax and then read the MR exemption rules.