6 year exemption.

Hi, my partner and I have recently purchased a property.

We plan to move into the house for a period of 5-7 days after settlement.

We plan to move our belongings into the property, change the addresses on our license & connect utilities. We will live there and travel to and from work.

We plan to rent the property for approximately 12 months.

Would we still be eligible for the 6 year CGT exemption?

I believe we meet the criteria.


Thanks.

 

you are just going to be there for a week?

The legislation doesn't list a minimum time, but expect an audit to justify it as the main residence during this time - the onus will be on you.

 

What reason would you give for moving back out after 5-7 days?

 

Well we plan to make it our PPOR for the foreseeable future. It’s just for the 11 month & 3 weeks period we would like to live elsewhere.

In the grand scheme of things the tax wouldn’t even be substantial. If the property increased 50,000 and we held it for 12 months (which we will). We would only pay tax on 25,000 @ our marginal rate that amount is not huge. However, if we could avoid it, we will try.

It will be our PPOR for a week. Guaranteed.

 

I didn’t think we would need a reason. What difference would 7 days make to 1 month?

From the way I read the legislation and relevant material is that we would need to prove that it was our PPOR - which can be done by changing drivers license, utilities and bringing our belongings to the house.

 

For CGT purposes you need to make it your main residence, not the PPOR - which is the language of the old legislation.

Yes it may not be much of a tax difference in the long run.
The ATO could apply Part IVA to this sort of thing potentially, but if not much of a tax advantage you can't be doing it for tax reasons.

 

I would doubt that you have established a main residence. In the absence of further information if I was advising I would say "NO". The Commissioner would likely form the same view based on the little you disclosed. s118-135 would require the dwelling to commence being a main residence for exemption to start to then allow an absence. If it isnt a valid main residency then no absence can occur. The scope of the exemption will consider the time the taxpayer has lived there but that alone is not a conclusive test. Case 26/93 also considered whether the taxpayer freely chose to spend time at one or another residence. A intention for it to be a main residence is insufficient (Couch case) eg "we plan to move into a house for a period of 5-7 days"

The word "main" is a key factor. Also your intention PRIOR to arrival is to merely occupy for 5-7 days. That is a potential sham and not a residence. Its a mere temporary home and you have likley acted to appear to satisfy exemption and the Commissioner could een apply Part IVA to a "scheme". The ATO would consider where you lived prior and where you lived after those days. If the same place then you can see the sham cant you ?

 

Thanks for the explanation.

I will not be moving back to the same property. We will in fact be moving to live in an apartment closer into the city.