Living in IP to cut CGT?
- Thread starter Delilah
- Start date
Living in the IP is not enough, it needs to be your principle place of residence (PPOR). You are only allowed one PPOR at a time.
It matters. If you make the house your PPOR as soon as practical after purchase and live in it for 6 months (I think) you can then move out and rent it for 6 years without it losing the PPOR status. This can be repeated infinitely. However, you cannot have any other property your PPOR at the same time (so you cannot buy another house and claim it is your PPOR as well).
OTOH if you move in after it's been rented out and make it your PPOR for, say 2 years out of the 10, then you will only be charged on 8/10 of the CGT.
Note that while it's your PPR, expenses such as interest and repairs will not be tax deductible. If you, say, make repairs just before putting in tenants again, those repairs will not be deductible (they will be treated like initial repairs). However, repairs to damage or wear caused by the generation of income can be deducted.
If you're trying to do something tricky to avoid CGT, it likely won't work and it could make your overall position worse-off. You'll only pay CGT for the period of ownership that a property was available for rent, and during that period you can claim deductions for interest, repairs, depreciation, rates, cleaning, property management, etc. Periods that the property is your PPOR (or otherwise not available for rent, such as family staying in it for free) will be CGT-free but all the expenses are no longer deductible.
If you have a PPOR and an IP, granting the IP your PPOR status will end the other PPOR's 100% no-questions-asked CGT exemption.
You're allowed up to six years in a single stretch.
http://www.bmtqs.com.au/cgt-exemptions
This article mentions though that ATO accepts a number of reasons for moving away from your PPOR, such as moving OS. I haven't seen this stated in the forums. I'd be interested in what the experts have to say on this. Presumably avoiding CGT is not intend the valid reasons.
http://www.bmtqs.com.au/cgt-exemptions
This article mentions though that ATO accepts a number of reasons for moving away from your PPOR, such as moving OS. I haven't seen this stated in the forums. I'd be interested in what the experts have to say on this. Presumably avoiding CGT is not intend the valid reasons.
Terry- would you have to provide a satisfactory explanation to the ATO for subsequently renting? Are there circumstances that they may seem that the move is just for saving tax?
No, the legislation just states if you are absent then you can still treat it as your main residence.
We are wanting to buy a home as a stepping stone. So we will be buying to move in straight away, however we will not stay in it. It will become an IP after 12mths.
So is you live in it as a PPOR for 12mths, then rent it out for the further 9+ years and we go to another PPOR. Does that make you exempt the entire CGT amount or still just 1/10.
It would be subject to CGT from the value that it is at the date you move out, not a percentage.
But what you could do is move out for 5 years and then move back in for a while and then out again. Depending on several things it could be totally CGT exempt.
The IP will only have 1/10 less CGT.
No, this is not correct.
