CGT question

[Darren1968]

A friend has the following scenario and is looking for advice on the CGT implications (if any).

His wife owned a unit prior to him meeting her.
She used the FHOG to purchase it but as it already had tenants she had to wait a few months before she could move in. She moved in within the 12 months required to satisfy the conditions of the FHOG.

She then lived in the unit for approx 2 years as her PPOR.

She then moved into my friends home (her name is not linked to this property at all) and her unit has been tenanted for 2 years now.

The unit is for sale and has shown considerable gain in the 5-6 years that she has owned it.

As it was her PPOR and she has not purchased another PPOR I would tend to believe that it would be CGT exempt.

Does the fact that she rented it out prior to moving in to it affect the CGT implications?

Does the ratio of time that it was rented V's owner occupied affect anything?

Does the fact that they are now married mean that their family home is automatically her current PPOR (even though the title/loan is not in her name)?

Any advice woudl be appreciated as he has not been able to determine the correct answer from the ATO web site.

 

[davea]

Does the fact that they are now married mean that their family home is automatically her current PPOR (even though the title/loan is not in her name)?

Once they became defacto, they couple can only claim one PPOR between them. However she may elect to have Unit A (Owned by Her) as her PPOR and be liable for CGT on Unit B (Owned by the husband) for half of the gain made between they were classed as defacto and the sale of unit A. This would then attract CGT discount as it was owned for more than 12 months.

So when did they be classifed as becoming defacto? Well its usually 2 years unless exception circumstances ie They buy a house (together) or get married (which it seems like the did).

Also the ato says if you cant move in straight away thats ok its still CGT exempt HOWEVER i thought this was limited to a 6 month time frame. They might agree if the tenant was on a 9 month lease and was evicted (as soon as expiry) then you MIGHT be exempt for the whole lot.

My personal opinion, please seek your own professional advice though

 

[julia]

The six months overlap rule only applies when you have another property at the time you buy the new one. So she will be subject to CGT on her home without any reset at market value the second time she rented it out. Its all pro rata on a time basis. They can choose to cover her place or his during the time they are living together (for up to 6 years on hers as they don't live there) or they can cover half each.
Don't forget to increase the cost base by all expenses including interest, rates, insurance, light globes and cleaning materials while she was living there

 

[Darren1968]

cgt

Thanks for the replies.

I've directed him to this forum so he can check the answers.