Is repeatedly resetting the 6 yr rule tax evasion?

[Li_d]

Hi All,

I have a question about my main residence in Sydney.
I would like to rent it out for 6yrs (while I rent in Melbourne and do some work there) and then move back in to reset the clock.
Then rent it out again for another 6 years (keep going back to rent in melbourne) and so forth repeating multiple times.

I know the legislation does not specify how many times this is valid, but has anyone actually done this more than 3 or 4 times successfully and be CGT exempt for 20 years of gains?

Theoretically this should all be do-able right?, but I am just worried that it may be viewed as tax evasion when the time comes for the sale. Thus would love to hear if any one has has had the experience of doing this for such as long duration and if they encountered any hassles from the ATO when it came to the sale time.

Thanks!
-Li

 

[Propertunity]

I would like to rent it out for 6yrs (while I rent in Melbourne and do some work there) and then move back in to reset the clock.
-Li

Are you moving back in just to reset the clock? Or do you have a job to come back to? How long are you staying before heading back to Melbourne to rent.

 

[marg4000]

To reset the clock, you must re-establish the property as your PPOR, which would entail proof of moving, utility bills, electoral roll, driving licence address etc. Keep very good records.

Just swinging by for a week or three probably will be seen in a different light.

However, as always, get good legal advice to protect your interests.
Marg.

 

[Terry_w]

Look at the legislation s118-145 ITAA97 there is an example in there of someone moving in, out, in and out again.

 

[coastymike]

Nothing in the six year absence provisions to prevent it.

Part IVA the next thing to consider.

 

[Li_d]

(propertunity) I would be moving in back to just reset the clock and I probably wouldn't work. If I setup all the utilities/electrol roll/ move all stuff in and physically live there, do I need to give any other reason for returning other than I just "felt like" returning home?
Or do you think this is where the plan would not work as the reason is not good enough?

I was planning on staying in the house 6months or do people think a 1 year period would be better before heading out again?

Thanks (TerryW) I looked at the example on the database for section 118-145 ITAA97, which implies it would be all good. Bit confusing though as they don't reset the the clock each time the guy moves in, they just add up all the absent years and say its less than 6 yrs in total so its good.

Thanks All!

 

[Li_d]

Coasty mike - what is the part4(a)? It only seems to go up tp part 4 in the legislation database?

 

[Rob G.]

Coasty mike - what is the part4(a)? It only seems to go up tp part 4 in the legislation database?

Part IVA Income Tax Assessment Act 1936.

Basically the Commissioner of Taxation has discretion under section 177F to cancel part or all of a tax benefit from a scheme to which this part applies.

It all depends upon him forming an objective opinion from the scheme facts whether a person entered into the scheme for a sole or dominant purpose of obtaining the tax benefit.

From all the surrounding facts such as the way the scheme was implemented, would an outside objective observer conclude that the obtaining of the tax benefit was more than an incidental purpose.

If it could be construed as more than incidental then specialist advice is needed.

 

[Terry_w]

(propertunity) Bit confusing though as they don't reset the the clock each time the guy moves in, they just add up all the absent years and say its less than 6 yrs in total so its good.

Thanks All!

They do start counting again once he moves in again. - he is overseas for 5 years, moves in again and then overseas for another 4 = 9 years absent

It is also says at (4)

You may choose to continue to treat the house as your main residence during both absences because each absence is less than 6 years.

 

[Li_d]

Thanks for sharing your info on Part IVA

So on face value this strategy may potentially not pass the test, would that be the general opinion?

Thanks for the input guys

 

[Terry_w]

Thanks for sharing your info on Part IVA

So on face value this strategy may potentially not pass the test, would that be the general opinion?

Thanks for the input guys

Depends on the situation behind it.

 

[Li_d]

No worries thanks Terry
Thanks all for the inputs
Cheers!

 

[Paul@PFI]

The ATO would bust a nut to prove the taxpayer was creating an illusion if its was done repetitively and it was brief and cursory.

Most crimes (and tax issues) are defeated by simple silly errors. The ATO are like criminal investigators. They will look for a single fact that is a lie. And then another.... I had a potential client issued a notice to supply a LOAD of documents and "information" to determine where and when they were resident somewhere once. They said they were absent too. ATO went to old bills from Telstra, electricity, gas etc, electoral roll and as I recall their bank for address details for the credit card bill. The card bill was going elsewhere. They found the persons partner (ex) at the time who dropped him in it. He then said he was overseas - made a mistake and his ex was just collecting the mail. They checked DFAT too and his second lie was proven. They upped penalties for each lie too. There was nothing I could do to assist by then.

Part IVA - No. Evasion.

 

[Chomp]

The ATO would bust a nut to prove the taxpayer was creating an illusion if its was done repetitively and it was brief and cursory.

Most crimes (and tax issues) are defeated by simple silly errors. The ATO are like criminal investigators. They will look for a single fact that is a lie. And then another.... I had a potential client issued a notice to supply a LOAD of documents and "information" to determine where and when they were resident somewhere once. They said they were absent too. ATO went to old bills from Telstra, electricity, gas etc, electoral roll and as I recall their bank for address details for the credit card bill. The card bill was going elsewhere. They found the persons partner (ex) at the time who dropped him in it. He then said he was overseas - made a mistake and his ex was just collecting the mail. They checked DFAT too and his second lie was proven. They upped penalties for each lie too. There was nothing I could do to assist by then.

Part IVA - No. Evasion.

So what if your bills all go to a PO box, or you pay online ? or is it you are presumed Guilty until you prove otherwise ?

 

[starbright]

Hi there

Does the 6 year rule apply if you are a non resident for tax purposes and living overseas? Ie. If I sell my ppor within 6 years while I am overseas, is it CGT exempt.

Thanks

 

[jrc]

So what if your bills all go to a PO box, or you pay online ? or is it you are presumed Guilty until you prove otherwise ?

Use your phone bills as they will show where you were. Is your etag use consistent with where you say you are living. Have you had friends round? Is the electricity/gas/ water usage consistent with you living there? Did you ever talk to your neighbours?

 

[Paul@PFI]

So what if your bills all go to a PO box, or you pay online ? or is it you are presumed Guilty until you prove otherwise ?

You are reading something I didn't say. In that case the client had some bills sent to his GF address. He said he didn't live there. She said he did. He said he went oseas at that time. He didn't.

My comment was about how the ATO will seek small details to prove a lie if they can. Then they can argue fraud and evasion. These small lies are what catches someone who tries to paint a picture to claim the main residence exemption when they don't actually occupy.

?xemption from property taxes can be very tempting...I cant tell you how many people ask if they can just treat a taxable property as their main residence. (What about if I ......is their usual question). Tax agents are often the counsellor that says no. Its a area of ATO focus as they know a lot of people don't declare property sale profits.

 

[Chomp]

You are reading something I didn't say. In that case the client had some bills sent to his GF address. He said he didn't live there. She said he did. He said he went oseas at that time. He didn't.

My comment was about how the ATO will seek small details to prove a lie if they can. Then they can argue fraud and evasion. These small lies are what catches someone who tries to paint a picture to claim the main residence exemption when they don't actually occupy.

?xemption from property taxes can be very tempting...I cant tell you how many people ask if they can just treat a taxable property as their main residence. (What about if I ......is their usual question). Tax agents are often the counsellor that says no. Its a area of ATO focus as they know a lot of people don't declare property sale profits.

Ah ok so I don't have to provide proof that I did live there, they will try and disprove it ?

 

[speary]

No, the burden of proof is on you. But if it is not genuine, they will pick out all the discrepancies in your story.

 

[Paul@PFI]

See what I mean....You say no/yes and someone says "but if""....It seems when you say a main residence is exempt everyone has a reason why the IP was their home.