Background
I have an existing property, PPOR, tenants in common (house1).
I will buy a new property worth say $500,000 (house2).
House2 will be 105% funded by loan (with surety from house1).
Once my co-owner of house1 is ready in 6 months or so, they will buy me out and I will put the money into house2.
As regards CGT...
Option 1 (IP first then PPOR):
Option 2 (PPOR, then IP, then PPOR):
Q. Are either of these options correct vis a vis CGT?
Another way of asking is: if I immediately rent out a newly bought property for six months, then move in as PPOR, is the CGT payable on a valuation difference between the start-end of rental, or fully on the sale-purchase price (whether that has increased by land, land + reno, or reno only)?
I've trawled the forums and ATO and can't work out what may be obvious...
Thanks for any unofficial help you can give!
I have an existing property, PPOR, tenants in common (house1).
I will buy a new property worth say $500,000 (house2).
House2 will be 105% funded by loan (with surety from house1).
Once my co-owner of house1 is ready in 6 months or so, they will buy me out and I will put the money into house2.
As regards CGT...
Option 1 (IP first then PPOR):
- rent house2 for 6 months, sell house1, get valuation on house2, move into house2 as my new PPOR, renovate for $1,000,000, sell 5yrs after buying for $10,000,000 (lol).
- benefit: low CGT (if any), I'm in the ACT so can claim stamp duty
- on sale of house2, CGT would be calculated on the difference between the purchase price and valuation at the end of 6 months - ie. it wouldn't take into account the renovations and *subsequent* (!) increase in value (due to combination of renovations and land increase).
Option 2 (PPOR, then IP, then PPOR):
- move into house2 for 1 month moving PPOR, leave house1 unrented ("vacant"), after 1 month move back into house1 and rent house2 for six months, then get valuation and do as option 1 after valuation
- benefit: no CGT payable at all
- on sale of house2, CGT would not be payable due to the six year excemption; no CGT is payable on house1 as it has never gained income while it wasn't a PPOR
Q. Are either of these options correct vis a vis CGT?
Another way of asking is: if I immediately rent out a newly bought property for six months, then move in as PPOR, is the CGT payable on a valuation difference between the start-end of rental, or fully on the sale-purchase price (whether that has increased by land, land + reno, or reno only)?
I've trawled the forums and ATO and can't work out what may be obvious...
Thanks for any unofficial help you can give!