"Investment > Owner Occupied, CGT"

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From: P Plate


Regarding Capital Gains Tax.

Say I purchased a property originally for investment, and was rented out for some years, then I occupied the house myself as my sole residence.

How long would I have to live in this property before I can sell it without incurring capital gains tax?
 
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Reply: 1
From: Duncan M


On 9/11/01 3:39:00 PM, P Plate wrote:
>Regarding Capital Gains Tax.
>
>Say I purchased a property
>originally for investment, and
>was rented out for some years,
>then I occupied the house
>myself as my sole residence.
>
>How long would I have to live
>in this property before I can
>sell it without incurring
>capital gains tax?

It works like this:

If you rented the property out for 5 years and lived it in after that for 6 years then you've owned the property for 11years.

You would pay CGT on 5/11ths of the gain you made and 6/11ths would be free of CGT.

You can never extinguish the liability you have generated as a result of buying it for an investment and letting it out for a few years.

Duncan.
 
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Reply: 1.1
From: P Plate


Thanks

I guess we can't have our cake and eat it to :)
 
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Reply: 1.1.1
From: Les .



Les> Donning "diablo avocado's" hat :-

If one were to do this (buy IP, then move in as PPOR later) - one would think that a valuation just prior to moving in as PPOR would be acceptable in determining just what amount of CGT needs to be paid.

Would that "hold water", Duncan? It might just be that the first 5 years saw minimal growth, while the following 6 years saw a huge jump in value. Can we protect ourselves as described above? I wouldn't want to pay 5/11ths of Gain if actual Growth in that 5 years was really 2/11ths of total gain ...

Regards,

Les
 
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Reply: 1.1.1.1
From: Dale Gatherum-Goss


Hi

No, that theory does not hold because ownership has not changed.

However, if the original purchase was the only property owned then even though you didn't live there, you could still elect to claim this one as your PPOR which means that there is no CGT when it is sold.

I hope that this helps

Dale
 
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Reply: 1.1.1.1.1
From: Les .



Thanks, Dale,

Doesn't sound quite fair - but if that's the law, then that's the law ...

Regards,


Les


- "Eschew Obfuscation" ;^) -
 
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Reply: 1.1.1.1.1.1
From: Rachel Freedman


Out of interest - if you have an IP, knock the house down and re-build a home for owner occupation...how is CGT calculated?

RF
 
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Reply: 1.1.1.1.1.1.1
From: Dale Gatherum-Goss


Wow! What a question and an interesting one in light of world events this week . . .

In the circumstances that you mention, the IP is taken to have been disposed at the date of the destruction for CGT purposes. Any insurance claim will form the proceeds of sale and the CGT will be worked from there. It get's a little harder because of the land component which has not changed hands and this is where a valuation would be more than useful.

Once this is done, the new home is then exempt from CGT because it is now your PPOR.

As always, I have simplified some rather messy rules so if you are in this situation do please seek complete advice.

I hope that this helps.

Dale
 
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Reply: 1.1.1.1.1.1.1.1
From: Rachel Freedman


Thanks Dale - I am not going to burn it down :) We just have a pretty old and crappy one which is on a block where I would like to live! I was not sure of rules - I will investigate further though!
Thanks
Rachel
 
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