Why live in a PPOR?

[lizzie]

My understanding of the rule is that the property wouldn't be capital gains tax free because it was an investment before. You would need to proportion the amount of time it was your ppor vs an investment to calculate how much capital gains tax you would pay. The longer it remains your PPOR the less capital gains % you will need to pay when you sell.

Nope - if you can prove you lived in the house at the start, before it became a ppor, as long as you have no other ppor in the following 6 years you can claim the property as your ppor (even if it was rented out for 5yrs 11mths) so no capital gains.

When the 6 years is nearly up you can move back in, out again, rent it again and restart the 6 year period.

The catch is that you cannot claim any other property as your ppor during the 6 year period (asides from a 6mths changeover if you sell and buy something else to move into) ... so only one property is ever cgt free at any one time.

http://www.ato.gov.au/corporate/content.aspx?doc=/content/86191.htm

 

[Terryw]

Nope - if you can prove you lived in the house at the start, before it became a ppor, as long as you have no other ppor in the following 6 years you can claim the property as your ppor (even if it was rented out for 5yrs 11mths) so no capital gains.

When the 6 years is nearly up you can move back in, out again, rent it again and restart the 6 year period.

The catch is that you cannot claim any other property as your ppor during the 6 year period (asides from a 6mths changeover if you sell and buy something else to move into) ... so only one property is ever cgt free at any one time.

http://www.ato.gov.au/corporate/content.aspx?doc=/content/86191.htm

s118-145 ITAA 1997 allows a CGT exemption on a property if it is your main residence and you later become absent. So if you lived in it briefly without making if your main residence it wouldn't necessarily qualify.

 

[lizzie]

s118-145 ITAA 1997 allows a CGT exemption on a property if it is your main residence and you later become absent. So if you lived in it briefly without making if your main residence it wouldn't necessarily qualify.

That's right ... which is why I said you'd have to prove you lived in it. This is done by utility connection bills, electoral roll etc. There is no rule as to how long it was your "main residence".

 

[Terryw]

That's right ... which is why I said you'd have to prove you lived in it. This is done by utility connection bills, electoral roll etc. There is no rule as to how long it was your "main residence".

Ok, I just wanted to stress not just "live" in it, but make it your main residence.

 

[lizzie]

How long ago was that? Would it still qualify for the 6 year PPOR rule? That rule is that if you lived in a property as your home

that's why I said this in post #31 ... but perhaps I wasn't clear enough when saying "lived in as your home".

 

[george72]

Nope - if you can prove you lived in the house at the start, before it became a ppor, as long as you have no other ppor in the following 6 years you can claim the property as your ppor (even if it was rented out for 5yrs 11mths) so no capital gains.

I'm confused. It was an investment from the start so how can you have lived in it? My understanding is it needs to be your ppr first. You need to have lived in it for at least 3 months within the first 4 years before it is rented out.

 

[wobbycarly]

I'm confused. It was an investment from the start so how can you have lived in it? My understanding is it needs to be your ppr first. [Correct] You need to have lived in it for at least 3 months [NO] within the first 4 years [and NO] before it is rented out.

As others have already mentioned, you need to "make it your residence" and then it can remain your PPOR for up to 6 years (while you have no other PPOR).

The definition of "make it your residence" has also been covered; some examples: get the address on your license updated; connect utilities; get some bills sent there; update electoral role, etc.

The length of time you actually live there is not defined in the legislation.

 

[lizzie]

When i first bought my IP1 I moved into it to renovate it and spent a few months there but the intention was to move back in at home to pay the thing off.

This is what the OP said ... he lived in it for a few months. The 6 year rule depends on whether he left a paper trail of him "living" there, ie, utilities connected in his name etc.

 

[george72]

As others have already mentioned, you need to "make it your residence" and then it can remain your PPOR for up to 6 years (while you have no other PPOR).

The definition of "make it your residence" has also been covered; some examples: get the address on your license updated; connect utilities; get some bills sent there; update electoral role, etc.

The length of time you actually live there is not defined in the legislation.

I was told that 3 months is the minimum time although it may not be in the legislation you have to have actually lived there. By the time you connect utilities and use them it's going to be 3 months at least. The ato told me that 3 months would be the minimum that you would want to stay there for. There was a case where the ato used the abs statistics for average usage of electricity, gas and water to determine that someone hadn't made it their residence. As for the 4 year rule. I was told by the ato that you if you buy a place to live and plan to rent it you must move in within 4 years of buying it. I haven't actually found anything that states this though.

 

[wobbycarly]

I was told that 3 months is the minimum time although it may not be in the legislation you have to have actually lived there. By the time you connect utilities and use them it's going to be 3 months at least. The ato told me that 3 months would be the minimum that you would want to stay there for. There was a case where the ato used the abs statistics for average usage of electricity, gas and water to determine that someone hadn't made it their residence. As for the 4 year rule. I was told by the ato that you if you buy a place to live and plan to rent it you must move in within 4 years of buying it. I haven't actually found anything that states this though.

I agree with you, in part. To connect utilities, etc, one would typically end up living somewhere for a few months. Doesn't mean it's law! And the other side of that is, that if you DID live there for 3 months, then it would be difficult for the ATO (or anyone else, for that matter) to argue that it WASN'T your PPOR for that time.

The 4 year rule could be to do with building a new place... or buying land to build on... something's tickling the back of my brain about that. Someone more knowledgeable than me can chime in here!

 

[george72]

The 4 year rule could be to do with building a new place... or buying land to build on... something's tickling the back of my brain about that. Someone more knowledgeable than me can chime in here!

The four year rule example was talking about buying a ppor that wasn't ready to move into. So if you buy a place and then had to do a lot of renovations before you are ready to move in then I was told they would need be completed and you would need to move in within 4 years. I was told this at a seminar on residential property held by the ato last week.

 

[george72]

And the other side of that is, that if you DID live there for 3 months, then it would be difficult for the ATO (or anyone else, for that matter) to argue that it WASN'T your PPOR for that time.

I think this is why the speaker said that 3 months was the minimum you would want to stay in it.