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From: Mike .


Capital Gains
From: julie
Date: 8/17/00
Time: 7:08:04 PM

Hi, If you own a home for two years and then move and rent the home, can you nominate it as your principal place of residence, (even though you no longer live there) and not pay capital gains on upon the subsequent sale of the property.

I have been receiving conflicting information:

At first, I was told you can nominate whichever home you like as your primary place of residence whether you live there or not, and hence not be subject to capital gains.

Alternately, I have been told that as long as you previously lives there, you have up to 6 years that you are not subject to capital gains.

Lastly, it has been suggested to me that there is some complex formula that works out a % of the time you lived/did not live there.

My accountant can't seem to tell me anything definitive.

Can you please respond? Thank you
 
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Scott

Reply: 1
From: Mike .


Re: Capital Gains
From: Scott
Date: 8/17/00
Time: 8:50:00 PM

Julie

I am in the same situation as you. We moved out of our home 3 years ago and rented. I confirmed with my accountant on Monday that you can only claim the most recent place that you lived in as your principal place of residence. And you only have six years from the time that you leave that place.

I also asked him about all of the depreciation and the special building allowance that I had claimed over the past three years while it was rented out. Apparently that is another windfall for me...I'm not complaining!

Scott
 
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Les

Reply: 1.1
From: Mike .


Principal Place of Residence
From: Les
Date: 8/18/00
Time: 9:00:21 AM

G'day Julie,

The following is from a real OLD posting ("Renting your old home" - Nov 99) - I knew it was there, so went searching ...

I suggest you seek out the original posting and read all of the answers. A book by Tony Compton, "Rental Property and Taxation" referred to in the replies gives some quite complete answers in this area.

Hope it helps,

Les

More info re "renting out your old home" From: Les Date: 11/30/99 Time: 6:12:42 PM Remote Name: 198.94.195.252


Comments G'day John,

A bit more reading (this time courtesy of Independent Research & Investment Service P/L (IRIS) regarding the "renting of your original home" led to a couple of VERY USEFUL points.

1. Temporary absence (up to 6 years)

"You can stop using your own home as your principal place of residence, and even rent it out for up to 6 years, WITHOUT LOSING YOUR CGT EXEMPTION. After 6 years, you do not have to return to your home, but, if you wish to preserve the CGT exemption, you must stop renting it. And you must put in writing to the ATO that you wish to have it treated as your principal place of residence during that 6 year period."

So that coincides with (and expands upon) Tony Compton's earlier words.

2. "If you wish to purchase a residence, then find you can't afford the mortgage payments, you could well consider using this exemption to your advantage by renting it out for up to 6 years and then moving back in, or selling it, WITHOUT LOSING your CGT exemption."

John, it doesn't help too much with your original question, but could well assist indirectly. "Now I'm moving out of my principal place of residence, what are the CGT implications" could be one of the off-shoot questions you may have - if you are still considering moving.

And, if (like me) you bought your "principal place of residence" before Sept 1985, this is such GOOD NEWS!!! It all helps with the "never, never sell" scenario.

Hope it helps, Les
 
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