six year CGT exemption clarification

[hobo]

Can I ask a similar question, please? Here is my time frame:

1993/4 - bought a place (QLD) and lived in it for a few years (~$105,000)

1997/8 - rented it out (rented everywhere else, no other PPOR purchases)

Apr 2009 - moved back in and did a complete renovation (unit was in "original" and very run-down condition when we moved in; we completely gutted it back to a concrete shell and redid absolutely everything)

Nov 2010 - moved out and re-rented it (had valuation done to use property as security for a loan in ~Dec 2012; came in at ~$265,000 IIRC)

- currently no other property deemed PPOR



So if we sell before Nov 2016, what are the CGT implications? Should we have had it valued in Apr 2009, to see how much CG there had been up to that point (prior to moving back in/the reno)? Hindsight is a wonderful thing....

 

[Terry_w]

Can I ask a similar question, please? Here is my time frame:

1993/4 - bought a place (QLD) and lived in it for a few years (~$105,000)

1997/8 - rented it out (rented everywhere else, no other PPOR purchases)

Apr 2009 - moved back in and did a complete renovation (unit was in "original" and very run-down condition when we moved in; we completely gutted it back to a concrete shell and redid absolutely everything)

Nov 2010 - moved out and re-rented it (had valuation done to use property as security for a loan in ~Dec 2012; came in at ~$265,000 IIRC)

- currently no other property deemed PPOR



So if we sell before Nov 2016, what are the CGT implications? Should we have had it valued in Apr 2009, to see how much CG there had been up to that point (prior to moving back in/the reno)? Hindsight is a wonderful thing....

Complex because you were out of in for 11 years. So CGT will apply in 2 different ways.

 

[hobo]

Thanks Terry, I thought it might be. I also need to check dates because it could have been rented out as early as 1996, which I believe might change things slightly.

Who do I ask about this - is my accountant likely to be able to calculate it for me? Or do I need to speak to someone else?

 

[Rob G.]

Can I ask a similar question, please? Here is my time frame:

1993/4 - bought a place (QLD) and lived in it for a few years (~$105,000)

1997/8 - rented it out (rented everywhere else, no other PPOR purchases)

Apr 2009 - moved back in and did a complete renovation (unit was in "original" and very run-down condition when we moved in; we completely gutted it back to a concrete shell and redid absolutely everything)

Nov 2010 - moved out and re-rented it (had valuation done to use property as security for a loan in ~Dec 2012; came in at ~$265,000 IIRC)

- currently no other property deemed PPOR



So if we sell before Nov 2016, what are the CGT implications? Should we have had it valued in Apr 2009, to see how much CG there had been up to that point (prior to moving back in/the reno)? Hindsight is a wonderful thing....

Assumptions:

1) Moved in 1993/94 as soon as practicable and used as a main residence throughout until 1997/98

2) Never had, or deemed to have, another exempt main residence.


Deemed to have acquired the dwelling when first used for income in 1997/98. First element of cost is market value at this date.

If you elect to treat the dwelling as your main residence until reoccupying in April 2009 then you will only have roughly 5 years where it will not be exempt. (You will have to work out the number of days that the particular period of absence exceeds 6 years.)

You will apportion non-exempt days divided by total days owned since first used for income in 1997/98, when you were deemed to have acquired the dwelling.

Cost base will be increased by your renovations.

 

[Paul@PFI]

I deal with a number of taxpayers in WA and even USA, UK, Europe, Asia etc far further afield. Happy to discuss as face to face these days is very unproductive for all. With phone, email and FTP most clients could be in same suburb as far as I'm concerned.

 

[Ross]

And one land tax exemption too.....I recall several years back a former client found out his waterside Wolseley Rd house was subject to land tax that way. Ouch. OSR went as far as citing his drivers license address and his electoral roll all showing his residence was with his new wife at her home. And he had a speeding offence and was asked by the officer if his address was still that on his license....They threw that fact at him too. His house was vacant in Pt Piper for three months (over 31 Dec) before they moved in and he was required to pay land tax. He wanted to argue he could elect his MR for land tax....No its not the same as the CGT election for a main residence. he could argue the overlap etc... Its a issue of fact...OSR came well armed.

Just to clarify, if you move out of (what has always been) your home/PPOR, rent it out and go and then rent elsewhere do you a Land tax exemption, same way you get a 6 yr CGT exemption ?

 

[Terry_w]

Just to clarify, if you move out of (what has always been) your home/PPOR, rent it out and go and then rent elsewhere do you a Land tax exemption, same way you get a 6 yr CGT exemption ?

Land tax rules are completely different to the income tax rules so the answer is no.

 

[Paul@PFI]

Land tax rules are similiar to the CGT rules in NSW. Clause 8 of the Revenue Ruling in respect of land tax addresses a former residence and how it can be exempt from land tax.

http://www.osr.nsw.gov.au/info/legislation/rulings/land/lt082v2

Look for the "stupidity clause". I have never found sense in the requirement to move back in...If you don't then the exemption ends. So why have the requirement to move back in ??

Ross, If you (or a partner !!) don't own elsewhere and the property is in NSW I say Yes.

You should however REGISTER for land tax and then claim the exemption. Its not automatic and disclosure can avoid disputes later.

 

[Terry_w]

Look at the strict requirements about claiming the main residence exemption and earning income (NSW):

(7) Income may be derived from the use or occupation of the former residence in a tax year if:

(a) the income is derived from a lease, licence or other arrangement under which a person has a right to occupy the former residence and the period for which any such right of occupation is conferred does not exceed a continuous period of 6 months, or a total period of 182 days, in the tax year, or

(b) the income is derived from any arrangement under which a person occupies the former residence, but the income is no more than is reasonably required to cover council, water and energy rates and charges and maintenance costs of the owner in respect of the residence.

(7A) For the purposes of subclause (7), each overnight stay counts as one day.

Clause 7 of Schedule 1A from the LTM Act NSW

 

[Ross]

Thanks Terry and Paul,
Yes I downloaded the 2014 NSW OSR Land Tax Booklet and got very excited when I read about a land tax concession of up to 6 years where you move out and essentially rent elsewhere. It did then go on to say the concession only applies each calender year where you have rented PPOR out for less than 6 months.
I think I agree with you Paul....stupidity

Ross

 

[jkat]

Yup no worries I understand it now. Cheers

But there's nothing preventing me from claiming it as my PPOR (and hence CGT exemption) when living at home with my folks and apportioning the CGT liability based on days as PPOR/not PPOR, right?

My accountant seems to think that I can't claim the exemption at all as the property has been used for income producing purposes, and the fact that I have other investment properties.

My understanding is if you had lived in it, then moved in with your folks and then rented... it would have been fine because you can't have two main residence exemptions. As you moved in with your wife into her house - there goes your exemption, because you have a new main residence exemption. Therefore you can't claim at all...

Someone please correct me if i'm wrong.

 

[Paul@PFI]

My understanding is if you had lived in it, then moved in with your folks and then rented... it would have been fine because you can't have two main residence exemptions. As you moved in with your wife into her house - there goes your exemption, because you have a new main residence exemption. Therefore you can't claim at all...

Someone please correct me if i'm wrong.

Correct you cant have two residences exempt from land tax unless you satisfy the Clause 7 Schedule 1A overlap rule or the intended new residence rule (Clause 6 ??). If you move in with spouse /defacto etc that wont happen.

Clause two contains the overriding "catch"....(Emphasis added)
the exemption will be allowed if the Chief Commissioner of State Revenue is satisfied that the land is used and occupied as the principal place of residence of the owner on the relevant taxing date...unless another exemption applies, that is ..

Clause 8 if the usual one that can be satisfied: An owner who is absent from his or her principal place of residence will be taken to have continued to use and occupy that residence if:

prior to the absence, the owner continuously used and occupied the residence for at least six months;

during the absence, the owner used and occupied another place of residence which is not owned by that person

Clause 12 A deals with a "family" and multiple properties:

Exemption is available for only one place of residence owned by members of a family. If members of the same family own and occupy more than one residence, the exemption will only apply to one of the residences. If one of the residences is the family’s principal residence, that property is exempt and the others are liable. If two or more members of the same family have different PPRs, and each property satisfies the PPR exemption tests, the owners may elect to have the exemption apply to any one of those residences. This option to elect is available if one member of the family is deemed to use and occupy a residence which is eligible for the concession under clause 8 (concession for absences from the PPR). If an election is not made, the exemption will apply to the property with the highest taxable land value.

A family is defined as a person and his or her spouse (if any) together with all dependent children or step children who ordinarily reside with them. A person’s spouse may be a person to or with whom the person is:

legally married; or
in a de facto relationship as defined in section 21C of the Interpretation Act 1987; or
in a ‘registered relationship’ or an ‘interstate registered relationship’ as defined in the Relationships Register Act 2010.

A child or step child may be a ‘dependent’ if he or she is under the age of eighteen years and not legally married.

If the Chief Commissioner is satisfied that a person is separated from his or her spouse and has no intention of resuming cohabitation, both the person and his or her spouse may be entitled to the PPR exemption for their respective PPRs.

 

[Terry_w]

Look at the strict requirements about claiming the main residence exemption and earning income (NSW):



Clause 7 of Schedule 1A from the LTM Act NSW

Sorry this is a copy from clause 8 of schedule 1A - subclause 7.