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6 Year CGT Exemption -

Discussion in 'Accounting & Tax' started by dmb1978, 8th Oct, 2016.

  1. dmb1978

    dmb1978 Well-Known Member

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    Hi all,

    I understand this has been discussed a bit but just wanted to get clarification on the definition of living at the house to claim main residence.

    Currently we are overseas and have no PPOR. We want to buy a property and then rent the property out until returning to live in it.

    As this will become our main address and currently have no fixed place of abode can we technically have this as our main residence?

    We need to have our drivers licences etc and electoral addresses updated to the new place and get the water put on in our name etc so what constitutes living as there as there is no physical record to show that you put a bed in and slept there?

    As there is no time limit, if the house takes a month to rent can we not claim this as our primary residence seeing as though we don't live anywhere else in Australia but still residents for tax purposes.
     
  2. Bran

    Bran Well-Known Member

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    I had to show removalist records, mail redirects etc when I claimed back stamp duty after moving into an investment property one day after settlement. Can't claim it as PPOR if its available for rent!?
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Nope. It cant be your residence until you reside in it.
     
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  4. dmb1978

    dmb1978 Well-Known Member

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    So how does it work if i decide to fly back and stay there for 2 weeks before advertising it for rent?
     
  5. Marg4000

    Marg4000 Well-Known Member

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    Two weeks won't cut it.

    PPOR means just what it stand so for - principal place of residence. In your case that is not in Australia.
    Marg
     
  6. dmb1978

    dmb1978 Well-Known Member

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    Thanks Terry, are you able to direct me to the legislation which defines "reside" i can't seem to find it.
     
  7. dmb1978

    dmb1978 Well-Known Member

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    Thanks Marg, technically i reside in Australia, so how is it any different to someone living in another house in Australia but still claiming the IP as their main residence? Is there a minimum time frame?
     
  8. Bran

    Bran Well-Known Member

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    Sounds reasonable
     
  9. datto

    datto Well-Known Member

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  10. dmb1978

    dmb1978 Well-Known Member

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    Thanks all. Just seem a bit unfair that the family home will always be subject to CGT because we couldn't live in it straight away and had to rent for a bit until returning.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Dont worry long term possibly no cgt will be payable.
     
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  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    See s118-145 itaa 1997 for the legislation. From memory the phrase main residence is not defined so you will hace to look into the ordinary meaning of the phrase and at caselaw.
     
  13. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Its wont "always" be liable to CGT based upon time. The basis for apportioning between taxable and tax free will always have a small element that becomes smaller as a % over time but as value rises. You may also find that non-deductible expenses like your loan interest, rates and other ownership costs incurred after you occupy it eliminate the CGT issue.....I think you arent correctly looking at the issue.
     
  14. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    118-135 is likely more relevant as it addresses moving in and occupancy and the key concept of having an ownership interest
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I just moved into a rental property - and I forgot to get the receipt for the lawn mower full I just bought.
     
  16. CK_Invest

    CK_Invest Member

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    What's the case if one purchases a PPOR and moves overseas but leaves it empty for several years / allows family (e.g. children/parents) to live in it?

    Would it still be subject to CGT so long as I don't rent it out?

    I assume having the bills (e.g. water / electricity) should be fine to prove I intend to have it as my PPOR, and perhaps proof of parents/children living there?
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Under s118-145 you can claim the main residence exemption indefinitely if you do not earn income from it.

    But if you never lived in it it could not be your main residence.
     
  18. CK_Invest

    CK_Invest Member

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    so what I gather from the above - assuming I let my children or parents live in it (but I continue to reside overseas) it can't be claimed as a "main residence"; but it still can be exempt from CGT should I decide to sell down the track?
     
  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No - it can only be exempt if it was your main residence.

    I am not sure if your family living there without you can result in it being your main residence. I don't think it can as you are not residing there.
     
  20. Marg4000

    Marg4000 Well-Known Member

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    If you don't live there then it is not your main residence and no exemption can be claimed.

    It will be subject to CGT whether you rent it out or leave it empty. You can let your children, parents or anyone else you like live in it, pay rent or not, but it won't make any difference - you will pay CGT for the time you own it until you actually move in and live in it yourself.
    Marg