"The Week That Was: 14-20/9, 1999"

From: Mike .

Hi Folks,

Into the third week now beginning Sept 14, 1999. The traffic is still quiet so all the chickens made it across the road without one being transformed into a chicken burger.

Stats-wise, 3 new posts and 13 replies with Sue and Les posting 10 replies between them. The longest thread had 7 replies. The Buy v Rent debate gets another working over with 2 threads and DHA pops up for the first time.

Just to give you an idea how slow the forum was in those days here are the post dates for one of the threads: 14/9/99, 19/9/99, 28/9/99, 3/10/99, 6/10/99, 7/10/99, 30/11/99, 4/4/00. No, that last date is not a typo. This was a late reply of 6.5 months after the first post! This was attentioned to Les who never replied, tsk,tsk. This fellow made the mistake of not posting his query at the top of the contents page or at least posting a "pointer" to the old thread. Of course, the new forum makes it easy to spot new replies to old threads with the New Messages and Todays Messages features.

Some notables: In hindsight, the DHA thread was the first in which a public company/org/group/club had unfavourable comments made about their product. So started a chapter in this forum's history which cast a large, dark cloud over it. The central issue was, of course, freedom of expression versus public slander (misrepresentation?), which was a moral versus legal debate. In the end, legal won the day. Remember that, newbies, when asking this forum to comment on a company or its product. Don't expect a candid response or any response, for that matter.

Susan made a brief appearance and said: "This is my first time checking in here and I really like the forum idea. I'll have to check in regularly in future." Well, I don't know why, but Susan never posted again. Did she join the legion of "lookers"?

Quotable Quote: "I've FOUND it - DON'T use the TAB key!!!" and, "Note to others - DON'T try to cut and paste from Word!!! And don't use Tab." This was quoted by Les, who didn't mention why but this became a running joke when people made multiple posts. By the way, this quote can be found in this week's Classic Post by Les. Enjoy. The question from Sue:

"Hi Les, I am interested in your comments about renting instead of buying first. I hear other people say this as well and wonder if you would mind expanding on this. I cant stop seeing renting as paying off someone elses mortgage (which of course as landlords we are happy for others to do for us) and in the long run even tho I know you are paying off your house with after tax dollars, it would be free from CGT and when you are ready to retire you can downgrade to something smaller and use the realised money to pay off some of your debts. Still as a lot of people espouse it, there must be some merit to renting yourself, I just need someone to explain it to me. Cheers Sue"

See the attached file for Les' reply.

PS: In another post, Les said, "When renting out your old home, CGT exemption CAN REMAIN while you rent it out for UP TO 6 YEARS - after which you must stop renting it (or lose CGT exemption)." I don't doubt you Les but this issue is important to my situation viz-a-viz relocating to London for ten years. I had intended to keep my PPR and rent it out, but that may not be wise based on what you said about CGT. It looks as though I would need to sell before 6 years is up to avoid CGT. Is that the case?

Regards, Mike
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Reply: 1
From: Les .

G'day Mike,

And can I say, your idea to host a "Week that was" has certainly revived a lot of memories for me - and, yeah, I recall that EAB never replied to a posting of mine - so I know what THAT feels like, too.

I wonder what happened to Sue (later Sue1) - I always looked forward to her posts.

Anyway, to your question, I believe the 6 year PPR situation still applies. But I'm shifting house, and the ATO's handbook is already packed and shifted (and I can't remember the URL - can you believe THAT, AndrewG??? ;^) so I can't be absolutely sure on that one. But if I trip over it, I'll let you know.

And thanks for the nostalgia trip,


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Reply: 1.1
From: Sim' Hampel

Les, I believe the 6 year rule does still apply.

We could always ask our resident "ATO web site" junkie for a reference URL (I'm too lazy to find it myself).

Dunc ?

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Reply: 1.1.1
From: GoAnna !


Perhaps you are writing a book? Could be an educational and amusing read.

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6 year PPR

Reply: 1.2
From: Terry Avery

I think you will find Les that after 6 years you lose the CGT exemption but
it is pro rata to the time you lived in it. For example you live in it for 3
years, rent for 8 and then live in it for 5 years then sell the CGT is
3+5/3+5+8 or 8/16 = 50% of the capital gain is taxed. The period you live in
it is exempt and this is explained in the handbook available on the ATO
website, as you pointed out. You didn't provide the URL, have the ATO
stopped paying you commission?
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Ross is getting the email digest...

Reply: 1.3
From: Ross Sondergeld


What do the email forum digest people think?

I like to get a "hit" every day...

Ross on the Gold Coast
Get Your Private, Free E-mail from MSN Hotmail at http://www.hotmail.com.
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Reply: 1.4
From: Mike .

Hi All,

Page 24 and 25 of the ATO "Guide To Capital Gains Tax - 1998-99" says the following WRT the 6 year rule for CGT exemption:

In some cases you can choose to have a particular dwelling treated as your main residence even though you cease to use it as such. This choice only needs to be made in the income year that the CGT event happens to the dwelling.

If you do not use it to produce income, you can treat the dwelling as your main residence for an unlimited period after you move out of it.

If you do use it to produce income after you move out, the total period of income producing use cannot be more than 6 years for any period you are absent. This can consist of one or more smaller periods of income producing which total up to 6 years.

One period of absence of 10 years

Income producing use for one period of 6 years

Elizabeth buys a house after 19 September 1985 but ceases to use it as her main residence for the last 10 years before she sells it. During this period she rents it out for 6 years and leaves it vacant for 4 years.

Any capital gain or loss Elizabeth makes on the sale of this dwelling is disregarded. The maximum period that the dwelling can continue to be her main residence while income producing is 6 years but, while it is vacant, the period is unlimited. Therefore the exemption applies for the whole 10 years.

Income producing use for more than one period totalling 6 years

If Elizabeth rents the dwelling out for 3 years, leaves it vacant for 2 years, rents it out for the next 3 years, then once more leaves it vacant for 2 years, any capital gain or loss she makes on selling it is again disregarded.

This is because the total period of income producing use during this absence does not exceed 6 years.

If you are absent more than once during the period you own your home, the 6-year period of income producing use applies separately to each period of absence. However, your home must again become your main residence after each period of absence.

If you make this choice, no other dwelling can be treated as your main residence unless you are moving from one main residence to another.

Me again: Well, it's quite clear from the above ruling that if I relocate to London and rent my PPR out while I'm gone, to avoid CGT I would need to return before the end of the 6th year to maintain the PPR status. I could reset the 6 year clock again if I remained there for enough elapsed time, say 6 months, to convince the ATO that I had taken up residence there again. Then I could shoot back OS for another 6 years. The other choice is to sell, but do I sell now in a flat market or do I wait until the market is more favourable? The disadvantage of holding onto the PPR is that the interest is not tax deductible. By trading in the PPR for an IP I would not incur CGT on the sale and the interest on the subsequent IP would be tax deductible.

Any thoughts?

Regards, Mike
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Reply: 1.4.1
From: Les .

G'day Mike,

Since you were planning to rent it anyway, why not go ahead (for up to 6 years). If your plans haven't then changed, and you wish to remain in the UK, then approach one of the groups that finds "caretakers" for people's homes. The owner thus has someone living in the place (stops the windows getting broken, etc.) The "caretaker" gets free rent while occupying the place. And you get to keep all of the Capital Gains when you do come back and reclaim it as your PPR.

Since no money changes hands after you stop renting it, this would protect your interest, as well as your CGT exemption, n'est ce pas?

Is it worth it? That would depend on the property itself, it's history of Capital Growth, and the loss of rent vs potential Capital Gain - where's that calculator??

Could help?



PS - TWTW statistics are pretty awesome - you might have to hire staff to handle 2001's weeks .... ;^)
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From: Mike .

Hi Les,

This London business has more obstacles than the Grand National. Thanks for the interesting suggestion. I'm seeing my bank manager and accountant soon so hoping to devise a strategy. Another factor I just thought of, which may complicate matters if I do sell, is the fact that my 2 IP's are secured by my PPR. I'm not sure that I can sell with this current arrangement. Messy, indeed.

WRT TWTW, I don't have the endurance of a marathon runner so don't know if I will reach the finish line. In fact, I may be posting from London to get it done. If it does become too much of a struggle maybe I can enlist a few forum addicts to do some posts, as well. Might be interesting to get other peoples impressions of the old posts.

Regards, Mike
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