CGT Tax 6 year rule

[Milkieboy]

Hi All,

Hope someone can help clarify the following. I just happened to be reading an API magazine from last year where in the Q and A section it states that if turn your PPOR into an investment property and you do not own a PPOR then it has CGT-free status for up to 6 years.

Our situation

Wife owned own PPOR before we Met
I owned my PPOR before we Met
Wife rents out her PPOR and moves in with me (before marriage)

We then sold wifes original PPOR (which was now an IP) within the 6 years of her having lived in it. Our accountant then completed our tax return and we paid 10K+ tax (CGT).

Now according to the comment in API magazine as my wife did not own another PPOR while renting it out she would be entitled to the GST-free status for 6years after moving out.

Can anyone comment on this? It was for the 04/05 tax year

BTW: API Magazine Ausgust 2007 page 83

Thanks
Ian

 

[Rob G.]

Only one PPOR per family - not each person.

Forming domestic relationships is hazardous to your wealth in this country.

If you both had elected to treat your home as 100% exempt, your wife's would be subject to CGT from the time you were "in a domestic relationship" which sounds like at least the time she moved in.

You cannot win by each electing 100% of you respective homes - you would then be denied an exemption for 50% of the time.

Cheers,

Rob

 

[Pat]

Good advice Rob the only thing I would add is that they could nominate her house as the PPOR until the house is sold then his house becomes the PPOR. By doing this her house gets the rental benefits until it is sold, no CGT is assessed to her based on the 6 year rule, but the time up until her house is sold becomes CGT assessable to him when he sells his premises. Hope that makes sense

 

[Stinktier]

Only one PPOR per family - not each person.

Forming domestic relationships is hazardous to your wealth in this country.

Cheers,

Rob

So very very true.

Shame the only way the government knows how to support families is by dishing out baby bonuses. If only they looked at the obvious.

 

[Milkieboy]

Thanks all for the responses.

Just for arguements sake if we were only friends then it wouldnt have been viewed as a domestic relationship and the sale would have been excempt from CGT for the first 6 years???

Ian

 

[BenQld]

I am in the exact same situation except my house is the one being rented out, and I am living in my partners house !

It sucks, but from what I can see, my house is now subject to CGT . Although her house was purchased about 18months after mine, and mine has gained about $130 - $150K, wheras hers has only gained around $80k, so I might look into possibly seeing if we can claim the exemption on my house not hers, as this could save a significant amount in tax. Is this possible ?

Ben

 

[Rob G.]

Elect whose house at the time the first is sold.

Cheers,

Rob

 

[BenQld]

Does it matter if we are married ? as we are getting married in Nov, and wont be selling any of the houses until we get back from the UK in 2010

Ben