PPOR to IP - valuation required yet?

Hi there, I'm about to convert my ppor of 3.5 years to an IP. We will be moving to a rental property for 6 months and then buying a new PPOR. I have read many times on the forum that valuation is important when converting PPOR to IP, but how about in this scenario where I can still claim my IP as PPOR for another 6 months and possibly 6 months thereafter due to the overlap of 2 PPORs rule. Do I get my property valuated now, in 6 months or a year? Someone please help, I just want to make sure that I'm doing everything correctly, it's my first IP!
 
I would like to piggy back this thread if you don't mind as we have a PPOR to be turned into an IP as well. But our situation is that we are planning to travel overseas for 6 months so we won't be living in a home here. We also run an online business and use our PPOR as our business address so I wonder if we could get some ideas on what hurdles we face with tax etc?
 
Hi People,

Rachels, with your situation, you can still actually treat your PPOR as a PPOR, even though you are renting it, for a period of up to 6 years (on the basis that you are not claiming any other PPOR).

Guess what? You can then move back into it (after travelling or renting) and then move out again and rent it again and get a fresh new 6 year period.

So you could very well have a situation where you are renting a your property, as an IP but still claim the PPOR exemption for CGT purposes.

Vampii, not too sure on this one although I would imagine that the valuation would have to be on the date that the IP first becomes income-producing.

Zargor

DISCLAIMER

This is not advice, check with an accountant!
 
Hi People,

Rachels, with your situation, you can still actually treat your PPOR as a PPOR, even though you are renting it, for a period of up to 6 years (on the basis that you are not claiming any other PPOR).

Guess what? You can then move back into it (after travelling or renting) and then move out again and rent it again and get a fresh new 6 year period.

So you could very well have a situation where you are renting a your property, as an IP but still claim the PPOR exemption for CGT purposes.

Vampii, not too sure on this one although I would imagine that the valuation would have to be on the date that the IP first becomes income-producing.

Zargor

DISCLAIMER

This is not advice, check with an accountant!

thanks so much
 
If the valuation is required for cgt purposes, but the cgt won't kick in because I am renting for 6 months, and then I am able to buy another ppor and claim 2 ppors for another 6 months, I don't really understand why I have to do the valuation now. It would cost $440 and I don't really want to pay this if it wasn't necessary at the moment. Help, anyone?
 
Hi People,

Rachels, with your situation, you can still actually treat your PPOR as a PPOR, even though you are renting it, for a period of up to 6 years (on the basis that you are not claiming any other PPOR).

Guess what? You can then move back into it (after travelling or renting) and then move out again and rent it again and get a fresh new 6 year period.

So you could very well have a situation where you are renting a your property, as an IP but still claim the PPOR exemption for CGT purposes.

Vampii, not too sure on this one although I would imagine that the valuation would have to be on the date that the IP first becomes income-producing.

Zargor

DISCLAIMER

This is not advice, check with an accountant!

6 year rule - so long as you don't claim another property as your PPOR during those 6 years that you have rented the first PPOR
 
If the valuation is required for cgt purposes, but the cgt won't kick in because I am renting for 6 months, and then I am able to buy another ppor and claim 2 ppors for another 6 months, I don't really understand why I have to do the valuation now. It would cost $440 and I don't really want to pay this if it wasn't necessary at the moment. Help, anyone?

If you want the valuation for CGT purposes, the valuation needs to be done at the time the property first earns income.

You can't use the 6 month overlap rule if the property is earning income. It's only there for people who have bought a new PPOR while trying to sell the old one.

The valuation enables you, when you sell the property, to use EITHER the valuation rule or 'percentage of time producing income' rule. You can use whichever is best for you. As you can claim the first six months of rental as CGT free (as you won't have another PPOR) maybe the 'percentage' rule will work out best.
 
Hi Vampii

I was in a similar situation to yours 18 months ago. I moved out of my PPOR and converted it to an IP. You will need to do the valuation when you move out and it becomes available for rent.

You will need to do the valuation anyway, but this is the time you will need to do it.

Cheers
PM
 
Thank you all for your replies :)
We have decided not to do a valuation and go with the 'percentage of time producing income rule' as described by Dan C. We don't really want to disturb the tenants as they moved in last Friday. Hopefully this would work out the best for us anyway.
 
Hi Vampii

Please ensure you check this, but I understood that you didn't have a choice as to whether you could use the time basis and valuation basis for setting the cost base of your PPOR, soon to be your IP.

I thought you had to go with the valuation method and you only use the time basis when turning an IP into your PPOR.

I know there was another thread regarding this but perhaps check with an accoutant.

Zargor
 
Hi zargor,
being a noobie, I haven't found a proper investment property accountant yet. I did however ask my personal tax accountant last week about this and we had cancelled the valuation due to her advice (I regret this now)
She said
- no need to get a valuation done yet as we get 6 months CGT free as we are renting and another 6 months due to the ability to claim 2 PPORs rule (unfortunately this is wrong according to the answers I got in this thread)
- no need to get a valuation done by a registered valuer, just go to allhomes.com.au to get a comparable price and print this out. (according to the forum this is not true either)
Is there any accountants on this forum that could clarify this, please :(
 
What is meant by :
6 year rule - so long as you don't claim another property as your PPOR during those 6 years that you have rented the first PPOR

Claim another PPOR property ?? when and why would you do this :confused:
 
What is meant by :
6 year rule - so long as you don't claim another property as your PPOR during those 6 years that you have rented the first PPOR

Claim another PPOR property ?? when and why would you do this :confused:

Many people do this. They decide to move and buy another PPOR but keep the previous home as an IP. Therefore the previous home is the IP (and subject to CGT) as the new property is the PPOR.
Marg
 
So I move out of my PPOR "A" and this becomes my rental.

I buy another house "B" to live in.

Sell my first PPOR "A" in 5years time which has increased in value $300,000. and pay no CG tax.

House "B" increased in value $200,000 then turn this into a rental.
I still tell the Tax department that house "A" is my PPOR.
So no CG tax ?

Is the above correct
 
So I move out of my PPOR "A" and this becomes my rental.

I buy another house "B" to live in.

Sell my first PPOR "A" in 5years time which has increased in value $300,000. and pay no CG tax.

House "B" increased in value $200,000 then turn this into a rental.
I still tell the Tax department that house "A" is my PPOR.
So no CG tax ?

Is the above correct

Yes but as Terry said house B will have to pay CGT from day 1 price. Not CGT after it has risen $200K. House B will be an IP but without the tax benefits because you are living in it (ie it is not income producing).
 
Hi again,
I thought I might try my luck again to get some clarification.

- Is there the option as mentioned by Dan C to use the 'valuation rule' or 'percentage of time' rule when converting PPOR to IP?

- Do I have to do the valuation right now even though I will be renting for 6 months?

Thanks for the answers and discussion so far
 
Hi again,
I thought I might try my luck again to get some clarification.

- Is there the option as mentioned by Dan C to use the 'valuation rule' or 'percentage of time' rule when converting PPOR to IP?

- Do I have to do the valuation right now even though I will be renting for 6 months?

Thanks for the answers and discussion so far

ATO ID 2003/1113

ATO reckons valuation is when you first use for income, provided it was fully your PPOR prior to this.

Cheers,

Rob
 
Let say if i purchase a Property 1 - PPOR and i move out after 6-7 months

Move into another Property 2 -IP

Rent out property 1 - am i able to claim depreciation etc for property 1?

as i have yet to sell it?
 
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