CGT question with a twist.

[Y33]

Posted on another thread but maybe better here.

Owner of PPOR working interstate and o/s for nearly 10 years lets mother and sister live in the house. Both mother and sister contribute to the running costs of the house. Mother is on pension and sister disability pension. Centre link recently ask if the mother is paying rent and replies 'no she only contributes to the running costs of the house'. Centre link advises to claim rent assistance.

Owner now married wants to sell and everyone move into a bigger house. Does this now mean the owner will be up for CGT if selling?

If owner pays back any contributions would this make the PPOR GST exempt.

 

[ezza]

If it's his only residence (owns no other property) and he's made no income from it then its not liable for CGT.

 

[Y33]

ezza,

Having other properties doesn't affect GST on a PPOR.
Even renting out a PPOR for less than 6 years still allows exemption from GST.

The main points are:

1) is that the situation of mother and sister living in the house is longer than 6 years

2) and if the ATO will consider contributions to ongoing costs will be classified as income

3) rent assistant was suggested by centre link and has only been for a few years since the mother became a pensioner.

 

[ezza]

Heya,

1) Doesn't matter who is living there and for how long as long as they aren't paying the owner any rent money, just paying for bills etc.

2) Are the mother and sister paying the owner ongoing costs? What costs? Or is the owner helping them out with bills etc? Sorry bit confused.. too early in the morning

3) This is where it gets a bit tricky because technically she is paying rent if receiving rent assistance. I would get advice from the ATO about this. The amount of rent assistance you get from Centrelink is a pittance anyway. Not that the ATO would neccesarily care about that.

 

[MattR]

From the sounds of it there would be no CGT as long as the owner had no other PPOR in Oz.

GST ...no issues.

Rent assistance - if she gets it but doesn't pay rent, that's her problem.

 

[marg4000]

Check with an accountant.

My understanding is that the period it was a PPOR would have been CGT free, along with the following 6 years (provided there was no other PPOR).
The remaining 4 years would attract CGT, subject to the 50% reduction. This is assuming the owner left and was absent for the entire 10 years.

If the owner was "coming and going" and at no time was absent for more than 6 years (and no other PPOR) then it should be totally CGT free.
Marg

 

[Y33]

marg4000,

The owner normally returns a few times a year for various periods of time but never more than a month to 6 weeks.

Mattr, ezza,

The problem with the rent assistance that my understanding is it was never asked for but centre link said the forms had to be filled out. Most bills are automatic deduction from a bank account that everyone puts money into.

 

[BV]

Y33

IMO the rent assistance is the issue
If they were NOT paying rent why they would agree to claim it?
Maybe they will let you off if you tell centrelink that there was a misunderstanding and they perhaps agree to take it back?

 

[Rob G.]

You *might* find that the definition of rent for Taxation Law and for Centrelink are different.

The ATO is not generally interested in contributions to assist with shared living costs (bills other than contributiong to ownership costs or exclusive use of part of the house).

Centrelink might just be concerned with costs for people to have a roof over their heads regardless. This is much broader.

Cheers,

Rob

 

[BV]

Rob

Good point, never thought of it that way.

I actually didn't think that anyone from centrelink cared if people had enough money to pay their bills but you could be right, someone must care.......

cheers

 

[coastymike]

We find that the question re renting the family home is a common one and uploaded a document discussing some of the issues a while ago.

Appreciate any feedback

http://www.guardianpartners.com.au/DocumentLibrary/tabid/58/Default.aspx

 

[marg4000]

The problem with the rent assistance that my understanding is it was never asked for but centre link said the forms had to be filled out.

This does not sound right to me.

Rent assistance can only be paid when rent is being charged, and must be confirmed by the landlord.

We had a property occupied by a tenant who claimed rent assistance. Every 3 or 6 months the tenant received a form which she forwarded on to us where we had to fill out our details and confirm the amount of rent being paid. We then mailed the form to Centrelink. This went on for 16 years until we sold the IP in 2007.

If she did not do this then she did not get the rent assistance. She always checked with us that we had posted the form on time.

So how could your mother get rent assistance unless you (the owner) confirmed that rent was being paid?

And if your mother was receiving rent assistance, then she should have declared to Centrelink the times you were living there as this may have affected her eligibility.

I suggest you get good advice before claiming PPOR exemption from the ATO as the Centrelink and ATO computers share information.
Marg

 

[Y33]

Marg,

After further follow up this information was gleamed.

A form was sent to owner and owner signed form but crossed out rent and wrote contribute to running costs. My understanding is there has only been one form sent to owner to fill out a few years ago and then a second one just recently.

BV,

This what I'm trying to understand.

RobG

The whole rent assistance area is really strange. It is allowable to claim rent assistance even if you own another property and rent that out. The mother has a rental property and everything to my understanding has been declared to centre link.

The whole situation is over my head and why I suggested it should be sorted out with ATO& Centre Link.