Sorry if this sounds repetitive as I know its been asked before but am still puzzled by how this works in practice. I know that accountants will say if you turned a PPOR to an IP then sold it a few years later (not claiming PPOR exemption cos you moved into another PPOR), you have to apportion the number of years it was rented to number of years you held as PPOR and pay CGT on rented years.
My problem with this approach is this: What if you spent money renoíng it up while it was your PPOR and all the other day to day expenses associated with maintaining the home before it became an IP? Who actually keeps receipts of stuff spent on your own home anyway and who doesn't pay cash for the tradies when it comes to renoíng PPORs? Eg. Buy for $400k, spend $40k reno, value is now $500k, move out after one years and sell year later for $525k. You have to pay CGT on 1/2 of $125k or $62.5k.
I would rather much prefer a market value methodology. ie get it valued before you move out so you then have a new cost base from when it becomes an IP. From my numbers above, you only pay tax on $25k.
Could anyone care to comment on a solution to evade, sorry I meant avoid the unfavourable treatment?
My problem with this approach is this: What if you spent money renoíng it up while it was your PPOR and all the other day to day expenses associated with maintaining the home before it became an IP? Who actually keeps receipts of stuff spent on your own home anyway and who doesn't pay cash for the tradies when it comes to renoíng PPORs? Eg. Buy for $400k, spend $40k reno, value is now $500k, move out after one years and sell year later for $525k. You have to pay CGT on 1/2 of $125k or $62.5k.
I would rather much prefer a market value methodology. ie get it valued before you move out so you then have a new cost base from when it becomes an IP. From my numbers above, you only pay tax on $25k.
Could anyone care to comment on a solution to evade, sorry I meant avoid the unfavourable treatment?
