working out cgt liability

[tgan]

Can somebody give me some help with working out what amount would be subject to cgt.
I have a property purchased in 1996 for $155k that I am now thinking of selling.
Property was an IP until 1999 when I moved in for about 18 months.
In late 2000, I moved out, and property became an IP again.
When I purchased the property, I spent about $5k renovating. Since then, no other expenses, other than the standard, ie, interest, rates, mngmtn fees, insurance.
The sale price would be about $600k, and the loan outstanding on this is about $80k.
How do I calculate what my tax implications would be.
Thanks in advance!
Tegan

 

[GaryT]

Do you have another PPOR and when was it purchased?

What was the value of the IP1 when you moved out?

 

[marg4000]

Since the property was an IP before a PPOR, CGT will be calculated on a proportional time basis.

Take total time owned, deduct time it was a PPOR (plus up to 6 years if no other PPOR after you moved out). You will then proportion the gain after allowing the 50% discount.

i.e.
You make $100K profit. discount by 50%.

You owned the property for 300 months, lived there for 100 months. Therefore 2/3rds of the discounted gain is added to your taxable income.
Marg

 

[tgan]

Since the property was an IP before a PPOR, CGT will be calculated on a proportional time basis.

Take total time owned, deduct time it was a PPOR (plus up to 6 years if no other PPOR after you moved out). You will then proportion the gain after allowing the 50% discount.

i.e.
You make $100K profit. discount by 50%.

You owned the property for 300 months, lived there for 100 months. Therefore 2/3rds of the discounted gain is added to your taxable income.
Marg

So my calculations are:

purchased 18 yrs ago at $155
todays value is $600
capital gain in 18yrs is $445
2yrs/18yrs was ppr, so 2/18 from $445 is $395
discount of 50% is $197

therefore, $197k is subject to tax as part of my taxable income?

Hope I am on the right track?

tgan

 

[perthguy]

Hope I am on the right track?

If only it was that easy! You also need to work out your cost base.

http://www.ato.gov.au/General/Capit...s/Guide-to-capital-gains-tax-2012-13/?page=10

"The cost base of a CGT asset is made up of five elements:

1. money or property given for the asset
2. incidental costs of acquiring the CGT asset or that relate to the CGT event
3. costs of owning the asset
4. capital costs to increase or preserve the value of your asset or to install or move it
5. capital costs of preserving or defending your ownership of or rights to your asset.

You need to work out the amount for each element, then add them together to work out the cost base of your CGT asset."

Also, if you were entitled to depreciation, you need take that off the cost base whether you claimed the depreciation as a tax deduction or not.

"In working out a capital gain or capital loss from a rental property, the cost base and reduced cost base of the property may need to be reduced to the extent that it includes construction expenditure for which you have claimed or can claim a capital works deduction."

http://www.ato.gov.au/Individuals/I...properties/Rental-properties-2012-13/?page=10

You might want to read more here: http://www.ato.gov.au/General/Capital-gains-tax/In-detail/Guides/Guide-to-capital-gains-tax-2012-13/

Personally, if I was about to increase my taxable income by $197k, I would get professional help!

 

[tgan]

"...Personally, if I was about to increase my taxable income by $197k, I would get professional help! ...."

Absolutely!!!

Thankyou heaps for your links.

Will definitely be running the idea past my accountant before I take any action.
Don't want to pay any more tax that I really have too.

Tgan

 

[GaryT]

If you did not have another PPOR then PPOR portion can be increased up to 6 years after you moved out.

So PPOR portion could be up to 8/18th.

 

[perthguy]

"...Personally, if I was about to increase my taxable income by $197k, I would get professional help! ...."

Absolutely!!!

Thankyou heaps for your links.

Will definitely be running the idea past my accountant before I take any action.
Don't want to pay any more tax that I really have too.

Tgan

No worries about the links. I sold my PPoR last year so I had to read all of that myself. Does my head in!

I forgot to mention that in the end the ATO CGT calculator helped me get my idea around the concepts. http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=CGT_and_real_property.XR4&go=ok

 

[travelbug]

If you did not have another PPOR then PPOR portion can be increased up to 6 years after you moved out.

So PPOR portion could be up to 8/18th.

This is incorrect. You can only use the 6 year rule if you lived in it as your PPOR first. The OP had it as an IP first THEN moved in.

 

[coastymike]

Travelbug he moved into the property in 2000 and then moved out again. He can elect for the property to be his main residence for up to 6 years after late 2000 when he moved out.

S 1118.45 says If a * dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence.

It doesnt say it had to be your ppor from the start.

 

[geoffw]

Travelbug he moved into the property in 2000 and then moved out again. He can elect for the property to be his main residence for up to 6 years after late 2000 when he moved out.

S 1118.45 says If a * dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence.

It doesnt say it had to be your ppor from the start.

However the OP may have bought and moved into another house. My understanding is, if that is the case:
1. The OP may choose to nominate one of the two houses to claim CGT exemption. I'm not sure if a period can be nominated.
2. I think that a small overlap is possible. So that there's a short period where both houses may be claimed. 6 months?

I'm happy to be proved wrong on either count.

 

[Terry_w]

However the OP may have bought and moved into another house. My understanding is, if that is the case:
1. The OP may choose to nominate one of the two houses to claim CGT exemption. I'm not sure if a period can be nominated.
2. I think that a small overlap is possible. So that there's a short period where both houses may be claimed. 6 months?

I'm happy to be proved wrong on either count.

6 month only applies if one sold

 

[geoffw]

Ok. Thanks for the clarification Terry.