IP into PPOR

Hi All,

I have an IP since 2009 that I would like to move into and make it PPOR.

I know I can't get the main residence 100% exemption or the magical 6 year rule since I didn't move in immediately.

However what happens for CGT when I eventually sell it?

For example I moved out 20 years later:
-5 years was IP
-20 years was my residence

Do I still have to pay CGT for the full capital gain over the whole 25 years, since I didn't move in "as soon as practically possible" after purchasing? Or does the ATO allow some aportionment for the period I was living there based on either valuation at the time of moving in, or a percentage of the gain?
 
Thanks Terry, I tried to find on the ATO site but I'm hopeless with their site.

So that means I don't need to get a valuation on moving in, it's just based on the percentage years/years?
 
I didn't know about interest, Terry. Does it include interest payment as PPOR? Or is that only for interest for loans taken out for maintenance or repairs as PPOR?
 
Don't forget to record all maintenance and repair costs while it is your PPOR to increase cost base.

Do you have to have all invoices??

I have details recorded in spreadsheet but didnt save all bills or invoices... :confused:
Renovations occurred 4-5 years ago
 
Thanks guys

I'm thinking of early IPs that were purchased 5-10 years ago, and today or in next few years the loan value has deflated in real terms.

These IPs becoming quite positively geared in the long term, and it can be cheaper to move in.
 
The CGT breakdown here will assist and may ensure nothing is missed.
The sheets labelled "CGT" are what is relevant.
 

Attachments

  • 2014 IP Rental & CGT v1.xlsx
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The CGT breakdown here will assist and may ensure nothing is missed.
The sheets labelled "CGT" are what is relevant.

Great spreadsheet Paul, thank you!!

Can I please confirm, if I buy new kitchen now while house is my PPOR, and only in 2 years it becomes IP, can I still include that kitchen as home improvement later in case of selling to reduce CGT??
 
Great spreadsheet Paul, thank you!!

Can I please confirm, if I buy new kitchen now while house is my PPOR, and only in 2 years it becomes IP, can I still include that kitchen as home improvement later in case of selling to reduce CGT??

Look at the link to the legislation that i provided:

(5) The fourth element is capital expenditure you incurred:

(a) the purpose or the expected effect of which is to increase or preserve the asset's value; or

(b) that relates to installing or moving the asset.
 
wow Terry, this is huge discovery for me but still little big confused...

Lets say I purchased house for 100K as PPOR
Lived in it for 5 years and its valued at 300K now...

If it becomes IP now and in 5 years I decide to sell for 400K lets say, instead of paying CGT on 100K profit, you saying I can include all interest rates, insurance, council rates and etc paid while PPOR to increase cost base, on top of 300K???

Sorry just trying to understand it correctly, thank you
 
Any expense listed in s110-25 not otherwise claimed could be used to to reduce CGT, including expenses incured while you were living there.
 
Nem - Its one of the most missed CGT reductions. I'm often contacted by Somersofters who have done a DIY calc and who have jitters about whether its wrong.

I like to ask questions about the property use throughout its life. Invariably they are stunned to find that a home can have deductions claimed when its non-deductible. Its not the same for everyone....Some cant use this method.

Or some find that its subject to 50% CGT when their defacto moved in.
Or exempt for periods while o/seas or interstate etc

The CGT rules are complex and easily misunderstood.
 
Any expense listed in s110-25 not otherwise claimed could be used to to reduce CGT, including expenses incured while you were living there.

Sorry, Terry and Paul. In this example of Nem, wouldn't the CG be calculated based on the valuation when it ceased being PPOR and became IP? So no deduction?

Also 3rd element sounds too good to me (no offense to anyone - just pleasantly surprised). Let us say
  • I bought IP for 300k and claimed all deductions, etc during that time.
  • After 5 years, it became my PPOR.
  • At year 10, the property was sold. From year 6 to 10, I paid 100k just for interest alone (original loan - not for reno or maintenance or increasing value)
  1. In this case, without considering depreciations, other expenses, etc, would the 100k be deducted for CGT calculation?
  2. What if the CG was less than 100k? Do I get capital loss?
 
Sorry, Terry and Paul. In this example of Nem, wouldn't the CG be calculated based on the valuation when it ceased being PPOR and became IP? So no deduction?

Yep

If a 100% exempt main residence prior to renting then the first element of cost is the market value and all other elements are reset to zero.



Also 3rd element sounds too good to me (no offense to anyone - just pleasantly surprised). Let us say
  • I bought IP for 300k and claimed all deductions, etc during that time.
  • After 5 years, it became my PPOR.
  • At year 10, the property was sold. From year 6 to 10, I paid 100k just for interest alone (original loan - not for reno or maintenance or increasing value)
  1. In this case, without considering depreciations, other expenses, etc, would the 100k be deducted for CGT calculation?
  2. What if the CG was less than 100k? Do I get capital loss?

    Nope

    Third element does not include holding costs for a reduced cost base.

    That is why it is called a "reduced cost base" :mad:


Third element costs cannot be added to an asset acquired (or deemed acquired) prior to 21 August 1991.
 
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