CGT Question

[j_p]

Currently My Ex and I are building a house and she wants to buy out my half - all fine. I'm just checking that I won't have to pay CGT as this was ment to be our PPoR and we claimed the FHOG (she will still live there)

If I need to I can move in for a week or two but I would prefer not to if possible

 

[duckster]

marriage breakdown roll over for CGT

http://www.ato.gov.au/individuals/content.asp?doc=/content/82083.htm

You may not pay the CGT depends it may be rolled over to your spouse read the link above !

 

[j_p]

She is an Ex g/f of almost 3 years. And I'm trying to avoid it altogether under the PPOR exemption. Is the intention of it been a PPoR enough or do I need to live there for X amount of time to be sure.

Thanks

 

[Terryw]

She is buying your share. There would only be CGT if it wasn't your main residence.

 

[j_p]

WEll that's the thing - as it isn't competed it ISN'T my main residence, or even a residence, it was just intended to be.

 

[RumpledElf]

You're not claiming anything else as a PPoR though ...

Have you actually worked out exactly how much CG you'd be up for? By the time you take out stamp duty for the initial purchase, legals, any interest etc unless the house has gone up dramatically above the building + land price there won't be a huge amount there. Are you paying her out for half of what it cost or half of the current value?

Guess you never get the FHOG again though, unless you can somehow un-apply for it. Hate it how that works.

Is this guy going to be up for stamp duty again on this buyout?

 

[SmiTTy2008]

Are you paying her out for half of what it cost or half of the current value?

I believe he is selling his share, rather than buying hers?

Im not an accountant, but i would not believe you would be liable for CGT as it was not an IP, nor did you intend to make any money from it. However rumpleEld is right - you probably would not be able to claim another FHOG in the future. Nonetheless - you could probably factor this in when you're selling your half - i.e. half the FHOG is yours.

 

[Mry]

It won't meet the conditions of a PPOR.

Here's a basic guide to the Main Residence Exemption.
http://www.ato.gov.au/print.asp?doc=/content/63517.htm

Of course that doesn't cover all the other fun things you need to know. Such as
SECTION 118-150 If you build, repair or renovate a dwelling

118-150(1)

This section applies to land in which you have an *ownership interest (except a life interest) if you build a *dwelling on the land, or repair, renovate or finish building a dwelling on the land.

118-150(2)

You can choose to apply this Subdivision as if the *dwelling that you are building, repairing or renovating on the land were your main residence from the time you *acquired the *ownership interest.

118-150(3)

You can make the choice only if:

(a) a *dwelling on the land that you construct, repair or renovate becomes your main residence as soon as practicable after the work is finished; and

(b) it continues to be your main residence for at least 3 months.

Sorry to the bearer of bad news. Of course, see your accountant.

 

[j_p]

Thanks for all the information.
We are still on good terms, I might just say it is my PPoR for three months and avoid any possible hassles.

 

[jrc]

Do it as an agreement under the Family Law Act and there won't be any CGT for you if the agreement is expressed that way as aprt of a court order. Talk to your lawyer.

 

[Intellikev]

Hi j_p, you are selling your interest to your ex. You are not selling to a third party. Your original intentions were to build a PPOR and your ex's intentions are still to do this. There was no investment purpose in your original decision.

Speak with an accountant however I do not think you are liable for CGT.

 

[Mry]

A common misconception with main residence exemptions is that people think if there was no profit motive, that the property is exempt. This is incorrect.

When I talk to people about PPOR exemptions, I start the discussion by talking about this rule-

All property in Australia is taxable upon sale*

* If a main residence exemption applies, it can be reduced. Conditions apply.

If an exemption doesn't apply, its taxable.

The advice on getting a Family Tax Law Agreement is sound.

 

[Intellikev]

With most of my dealings with Accountants and their interaction with the ATO most of the issues relate to intent. What was your intention when you purchased the land? Was it to on sell at a later date, was it to build a house and rent it out? No, your intention was to build your home! You and now your ex have had a change in circumstances. She now wishes to buy out your portion. I suggest you seek clarification, make an appointment to see your accountant and approach the ATO for a private ruling.

 

[dan c]

It can't be you PPOR until you have moved in.

Having said that, the holding costs you have incurred in building, such as interest, council rates, water rates etc would increase the cost base, and potentially reduce any CGT payable, hopefully to zero.

 

[Mry]

Intent has more to do with how something is taxed, rather than whether or not it is taxed at all.

 

[EarlyRetirement]

Just so you know, for family law purposes, entering into a Binding Financial Agreement will ONLY grant you an exemption for stamp duty if the transfer is made pursuant to the agreement. It does not provide any reduction in CGT which may otherwise apply. That being said, there is a rollover relief period of 2 years which you may be eligible for.

 

[SmiTTy2008]

The topic makes me wonder about the situation where someone moves into a place (calling it a PPOR), rennovating and selling 6+ months in. Then doing it over and over again. Conforming to the conditions of a PPOR, but obviously there to make a profit (intent).

Anyway, im not wanting to hijack the thread, just merely thinking out loud

J_P - this is an interesting topic. If you end up seeing an accountant on this issue, please let us know the outcome and what you decide to do.

 

[Perp]

The topic makes me wonder about the situation where someone moves into a place (calling it a PPOR), rennovating and selling 6+ months in. Then doing it over and over again. Conforming to the conditions of a PPOR, but obviously there to make a profit (intent).

The ATO can infer, if it's being done repeatedly, that your intent is to make a profit, and the bad news is that you'd not only be subject to CGT, but you'd be ineligible for the 50% discount (even if you hold for more than 12 months) because you're in the business of property developing, ie the "capital gains" are actually classified as income in this situation.