Appreciate any views - I'm sorry this is somewhat long.....
We have been oversea's for some time and renting out our PPOR that was purchased in March 2000 - we lived in it from purchase to moving out in March 2002. As of March 2008 we will breach the 6 year rental timing and the property will then become subject to CGT.
My interpretation of the CGT exposure is as follows: lived in the property for 2 years prior to the rental, for 7 years of rental (to March 2009) the calc is: (7-6 year exemption))/(2 years lived in +(7-6)) = 1/3 = 33.3% * 0.5 = 16%, 8 years 25%, 9 years 30%,.....14 years 42% and ofcourse < 6 years 0%. Capital gain will be around 300k as of March 2009 (crystal ball )
The above has got me to thinking about whether there's any sense in selling this property prior to hitting the CGT liability, my aims are buy and hold.
I suspect that if I were to sell and channel the money back into other IP's then I'm better to hold this one as I'd incur selling costs on this property and stamp duty costs on purchasing a new one(s), and they'd be exposed to the full CGT anyway.
If my plan was not to re-invest in new property, but reduce debt on existing IP's, then I suspect this would be a reasonable thing to do - but I know we'll buy more property in four or five years.
Appreciate if anyone see's a flaw in my logic above - if it's not clear, I'm leaning toward don't sell.
A second issue (HDT related) is that we will be back in Oz in a couple of years and want to move into one of the properties in our HDT. Given the not insurmountable challenges (but challenges nonetheless) of renting an IP to yourself under a HDT structure (our original plan), I wonder if it's possible to forget the whole rent to self thing and declare the property you plan to live in longterm as your PPOR - while it remains in the HDT (my concern is the s/duty incurred by taking it out of the HDT and putting it in your own name).
Appreciate any views.
Ralph
We have been oversea's for some time and renting out our PPOR that was purchased in March 2000 - we lived in it from purchase to moving out in March 2002. As of March 2008 we will breach the 6 year rental timing and the property will then become subject to CGT.
My interpretation of the CGT exposure is as follows: lived in the property for 2 years prior to the rental, for 7 years of rental (to March 2009) the calc is: (7-6 year exemption))/(2 years lived in +(7-6)) = 1/3 = 33.3% * 0.5 = 16%, 8 years 25%, 9 years 30%,.....14 years 42% and ofcourse < 6 years 0%. Capital gain will be around 300k as of March 2009 (crystal ball
)The above has got me to thinking about whether there's any sense in selling this property prior to hitting the CGT liability, my aims are buy and hold.
I suspect that if I were to sell and channel the money back into other IP's then I'm better to hold this one as I'd incur selling costs on this property and stamp duty costs on purchasing a new one(s), and they'd be exposed to the full CGT anyway.
If my plan was not to re-invest in new property, but reduce debt on existing IP's, then I suspect this would be a reasonable thing to do - but I know we'll buy more property in four or five years.
Appreciate if anyone see's a flaw in my logic above - if it's not clear, I'm leaning toward don't sell.
A second issue (HDT related) is that we will be back in Oz in a couple of years and want to move into one of the properties in our HDT. Given the not insurmountable challenges (but challenges nonetheless) of renting an IP to yourself under a HDT structure (our original plan), I wonder if it's possible to forget the whole rent to self thing and declare the property you plan to live in longterm as your PPOR - while it remains in the HDT (my concern is the s/duty incurred by taking it out of the HDT and putting it in your own name).
Appreciate any views.
Ralph
