sell now, cgt exempt OR wait and got cgt ?

[erwinsie]

hello. im a novice investor, bought a property years ago, live there for a while then rent it out. now 5 years later, considering 6-years cgt exempt rule, im thinking to sell it. is this a wise decision? should i sell it before 6 years or keep it ? i am blind about tax.

is the saving from cgt exempt is VERY big and must to get (if possible) ?
for example, bought it for $350K market price now around $500K.

option if i wait is to refinance it and use the difference to buy another one.. i have around$300k left on my morgage.

thanks

 

[devank]

I'm answering only because I'm in a similar situation. Not because I'm an expert in this.

Here is rough calculation.
Assuming you didn't spend any capital expense.
Profit = 500 - 350 = 150K

50% of it = 150/2 = 75K

Assume you pay 33% tax rate.

CG tax = 75 * 33% ~= 25K

You will have 125K out of 150K in your hand.

Also remember you can move back in and then go into another 6 year period. I don't know how long you need to be in your house again. I'm not sure how many times you can do this either.

 

[erwinsie]

@devank, thanks. i can see its quite significant to try get cgt exempt.

the 50% of it part.. where you get 50% ? will this always 50% ? or 50% if sell between certain period ?

BUT see my other post, im 80% sure we can NOT do another 6 years loop like before! the rule has change. i need someone expert to verify this...

 

[Roosterman]

If you hold an asset for more than 12 months you get a 50% discount on the amount of CG that you pay....

 

[devank]

Say you sell the house after 10 years. I think you pay the CG tax only on the componant from 6ht year to the 10th year. You need to value the property at the end of 6th year.

 

[Ed Barton]

@devank, thanks. i can see its quite significant to try get cgt exempt.

the 50% of it part.. where you get 50% ? will this always 50% ? or 50% if sell between certain period ?

BUT see my other post, im 80% sure we can NOT do another 6 years loop like before! the rule has change. i need someone expert to verify this...

if you need an expert pay one and phone your accountant!

I'm 95.23% you are wrong and can do another 6 years. it will genuinely need to be your ppor for a period of time though.

 

[Rezix]

Yeah you can do another 6 years... Just have to live in it for another 6 months. Whether you sell now or in 3 years doesn't matter - The first 6 years after buying it will be CGT free thanks to the CGT rule, so you are really just looking at whether you want to add another 6 years CGT free, sell now and pay no capital gains tax, or just start incurring a cgt liability from the date your 6 years is up until you actually do sell (without living in it for another 6 months).