CGT Question...Help!

[Lynchy]

Hey everyone,

Tried to find a thread with a similar question but couldnt find a definitive answer.

My gf brought an apartment (signed the offer & acceptance) on the 20/06/09. She has had an offer for the apartment that she is interested in accepting. The problem is she has just signed a rental agreement for the apartment starting from 30/05/2010 (the offer was a bit out of the blue). It has been a PPOR since purchase.

The people making the offer have said they can sign the offer and acceptance on the 29/06/2010, thus signing it before it is used as a rental, or they said they can also sign it after the 15/06/2010, meaning my gf would have had it for over 12 months.

Which one would be most beneficial for tax reasons?

Thanks very much

 

[Luv2Travel]

Where is your girlfriend going to live when she moves out? If she's not going to be claiming PPOR exemption anywhere else then it's probably a non-issue, as she can still claim main residence exemption on this property for up to 6 years. If CGT is an issue on this property I'd be inclined to wait out the 12 months, however you're talking about deferring the contract more than 2 weeks. What if the buyers change their mind?

 

[Lynchy]

Moving into her parents house! I thought she would incur CGT if she sold within 12 months of purchase? Even if it has been a PPOR?

 

[Luv2Travel]

If it has been her PPOR until now, and she's moving out (and not claiming main residence anywhere else), she can still claim it as her main residence (i.e. exempt from CGT) for up to 6 years while renting it out.

Unless I'm missing something (am sick today, so brain only half working), it seems pretty straight forward and safe to sign it at whatever date, and no CGT will apply.

The importance of the 12 months is only if she's subject to CGT (which I don't believe she is), then if she has it more than 12 months she only has to pay tax on half the gain. If she holds it for less than 12 months then you pay tax on the whole capital gain (obviously apportioned for the time it's an investment property).

 

[Lynchy]

Great!

Thanks very much for your help

 

[mark213]

If it has been her PPOR until now, and she's moving out (and not claiming main residence anywhere else), she can still claim it as her main residence (i.e. exempt from CGT) for up to 6 years while renting it out.

Unless I'm missing something (am sick today, so brain only half working), it seems pretty straight forward and safe to sign it at whatever date, and no CGT will apply.

The importance of the 12 months is only if she's subject to CGT (which I don't believe she is), then if she has it more than 12 months she only has to pay tax on half the gain. If she holds it for less than 12 months then you pay tax on the whole capital gain (obviously apportioned for the time it's an investment property).

Hi there

Just a follow on qs...
If it is your PPOR and your only PPOR then CGT doesnt apply for 6 years.
After 6 years - is that the date that the valuation is set (and going forwargds CGT is calculated), or is it started from date it was a rental, or when it was purchased?

Ie when should i get a valuation on my PPOR for CGT purposes?

Thanks

 

[marg4000]

The purchasers will have to honour the lease.

There is no way she can sign a contract on the 30th to rent out a unit she sold on the 29th via a backdated contract.

I suggest good legal advice.
Marg

 

[Legs]

From:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36878.htm

:
"Selling your home


Overview

Generally, if you are an individual – not a company or trust – you can ignore a capital gain or capital loss from a capital gains tax (CGT) event that happens to a dwelling that is your main residence (also referred to as 'your home').

To obtain full exemption from CGT:

* the dwelling must have been your home for the whole period you owned it
* the dwelling must not have been used to produce assessable income, and
* any land on which the dwelling is situated must be two hectares or less.

If you inherited a dwelling or a share of a dwelling and it was not the deceased’s main residence, you may not get full exemption (see Inheriting a dwelling).

If you are not fully exempt, you may be partially exempt if:

* the dwelling was your main residence during part of the period you owned it
* you used the dwelling to produce assessable income, or
* the land on which the dwelling is situated is more than two hectares.

Short absences from your home – for example, annual holidays – do not affect your exemption. "

ALSO: IN REGARDS TO 12mth mentioned (i dont believe it's relevant after reading this):

http://www.ato.gov.au/individuals/content.asp?doc=/content/36883.htm

"
Is the dwelling your main residence?

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Why does it matter?

In general, your main residence (your home) is exempt from capital gains tax (CGT).
What factors apply?

The following factors may be relevant in working out whether a dwelling is your main residence:

* the length of time you live there – there is no minimum time a person has to live in a home before it is considered to be their main residence
* whether your family lives there
* whether you have moved your personal belongings into the home
* the address to which your mail is delivered
* your address on the electoral roll
* the connection of services (for example, phone, gas or electricity), and
* your intention in occupying the dwelling.

A mere intention to construct or occupy a dwelling as your main residence – without actually doing so – is not sufficient to obtain the exemption. "


Hope this helps... for get the 12mths rule if she is an individual that didn't operate a business from it..


Cheers.

 

[Neil Young]

Hi there

Just a follow on qs...
If it is your PPOR and your only PPOR then CGT doesnt apply for 6 years.
After 6 years - is that the date that the valuation is set (and going forwargds CGT is calculated), or is it started from date it was a rental, or when it was purchased?

Ie when should i get a valuation on my PPOR for CGT purposes?

Thanks

Hi
Can someone answer marks question
Im in the same boat ie bought townhouse in Sydney 2005 180 k as ppor
Rented out jan 2009 , value about same as purchase .
Revalued jan 2010 , 230 k. But nothing in writing .

Should I get revaluation in writing now or what floor gct value will the ato use ? Thanks

 

[Rob G.]

Hi
Can someone answer marks question
Im in the same boat ie bought townhouse in Sydney 2005 180 k as ppor
Rented out jan 2009 , value about same as purchase .
Revalued jan 2010 , 230 k. But nothing in writing .

Should I get revaluation in writing now or what floor gct value will the ato use ? Thanks

If initially your PPOR then the date for valuation is the FIRST USE FOR ASSESSABLE INCOME.

ATO ID 2003/1113

So if your 6 year absence is exceeded, the valuation is the day you moved out.

Not too sure whether this will apply as well to people who have been "piggybacking" absences by moving back in, but stuff up and exceed their latest 6 year absence concession.

Cheers,

Rob