Granny Flat and CGT

[Monja]

Hi

I recently bought a new PPOR and downstairs is a whole other living area (excluding shower) and I am thinking of renting it out to my brother in law at market value. I was just wondering if I live in the place upstairs for 5 years min and rent the area downstairs for about 2 years, when I come to sell what would the CGT consequence be? And also can I do a PAYG income adjustment on this situation?

 

[Propertunity]

Hi

I recently bought a new PPOR and downstairs is a whole other living area (excluding shower) and I am thinking of renting it out to my brother in law at market value. I was just wondering if I live in the place upstairs for 5 years min and rent the area downstairs for about 2 years, when I come to sell what would the CGT consequence be? And also can I do a PAYG income adjustment on this situation?

Hi Monja, welcome to the forum.

When you use your PPOR for income producing purposes you will generate yourself a CGT liability when you sell. This would be based on the floor m2 area you are renting out comparted with the total m2 area, and the time you do it for Vs the time you hold your PPOR for and if the property even had a CG in the times we are talking about. (ie. if you purchased for $350K and sold for $350K it would make zero difference what you did in regards renting it out as there is no CG to speak of).

Yes, you can do a PAYG tax adj. for the situation you are proposing.

With both these issues you should talk to an accountant IMO so you do it properly and know exactly where you stand. Also make sure you have a proper lease in place for your proposed tenant - so you can justify all the expenses againt the income you will derive.

 

[CarolInPerth]

Thanks for pointing me to this thread, Propertunity.

If the area rented is not under the main roof what is the basis for calculating the gain? Is it the land area covered by the dwelling plus an area surrounding it such as parking bay and courtyard? What about common areas?

I wonder if there is a spreadsheet somebody is willing to share that helps work this out.

Carolyn

 

[Propertunity]

It would be best to talk to your Accountant for professional advice on this.

 

[CarolInPerth]

It would be best to talk to your Accountant for professional advice on this.

I will be. Meanwhile I found this ruling by the ATO which was very helpful to read. http://www.ato.gov.au/printfriendly.aspx?doc=/rba/content/48928.htm