Re: Renting residence from trust
Hi
Obviously, the sale of your PPOR is exempt from CGT. However, if a trust owns a house which is rented to you, under the defiinitions of the law for long term leases, this same house owned by the trust might also be effectively exempt from CGT too.
The long term leases effectively gives the tenant the same rights as the owner.
NO, either trust could do this, but, the tax office is presently unhappy about unit trusts owning a home and renting it to a unitholder. As a hybrid trust is part unit trust and part discretionary trust it is uncertain what views they will take about this structure renting a home to the unitholder. Obviously, seek advice from your own advisors before considering this!
NO, I cannot confirm that a trust owning a house and renting it will be subject to CGT - see above.
In your scenario, you will have to choose which way you wish to go. If you choose to have the old home as your PPOR then it will be still exempt from CGT even though it was a rental property for 3 years.
However, in doing this, the new home owned by the trust will be subject to CGT.
You cannot have both in this sense. Sorry
Dale
Originally posted by RichardA
Dale
Could I clarify a few points please (excuse me for being a little slow on the take up - some of the lingo is new to me).
1. We are talking about a trust buying an existing principle residence from an individual not buying a new property? Hence no CGT on sale?
2. Why the need for long term leae?
3. Is this opportunity available to Discretionary Trust only (ie not Hybrid) ?
4. Please confirm that once a trust buys the principle residence you lose the CGT relief even if you are renting it back.
5. In this scenario:
- If I have a principle residence owned by wife
- Trust buys another property and we move into the new one renting it from the trust
- We rent out our old principle residence owned by wife
- We live in new house for 3 or so years.
- We then move back into old house.
Does or can old house be maintained as principle residence (and therefore maintain CGT exemption) even though not lived in?
Assuming the answer is that you forgo the exemption - would we be better to buy the new residence in our own name and therefore take advantage of the Pr exemptions.
Have I made any sence?
Thanks in anticipation.
Richard A