Living in IP & Capital Gains Tax

[bth]

Hi If I purchase an IP and live in it for the first 12 months ( at least ) do/can I avoid capital gains tax when I come to sell ? And is there a formula for calculating capital gains tax at selling time ? Thanks

 

[Ausprop]

well you would buy a PPOR to live in for year 1, then move out and elect it as your PPOR for exemption for the 5 or 6 years or whtever it is and hence it would be free of CGT however you can only claim it on one place of course

 

[TheCamel]

basically, what Ausprop said.

If you then buy another home to live in, you lose the CGT exemption on the first residence.

However, after 6 years, I beleive you can move back in for 1 year, and it starts again.. ?

 

[Les]

G'day bth,

If I purchase an IP and live in it for the first 12 months ( at least ) do/can I avoid capital gains tax when I come to sell ?

Yes, so long as your NEXT place of residence is NOT your PPOR, this can remain as your PPOR (e.g. you might chose to rent a place, while keeping this as your "official PPOR").

It does go deeper (so talking with an Accountant is always a good idea) - e.g. you might buy another place to live in - but (as I understand it) you still can CHOOSE which of these two is "your PPOR". You might buy a "cheapie" to live in, but NOT declare it as your PPOR - thus this first one remains "your PPOR".

The only concern comes when "Land Tax" comes along, and they ask you questions re "how long you lived in each place" - an Accountant is VERY necessary aorund that time..... I had heard you could choose "your PPOR" as late as selling time (but the Land Tax bit caught me out). Do check your options out with the required people.

And is there a formula for calculating capital gains tax at selling time ?

If you have held the place for greater than 12 months, then simply add HALF of the profit to your Taxable Income for the year in which you sold it. Then your Income Tax is adjusted upward to suit the situation.

Hardly a "formula" as such, as so much depends on your Income (or likely Income in the year of sale) and whatever Marginal Tax rates are at then.

Regards,