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6-year rule

Discussion in 'Accounting & Tax' started by htopg, 12th Sep, 2015.

  1. htopg

    htopg Well-Known Member

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    Does anyone here have the following similar experience?

    1. purchase a property
    2. has the intention to make it PPOR
    3. move in on the first date
    4. move out one week later due to financial reason
    5. rent out the house
    6. claim all interest, repair, depreciation
    7. claim CGT exempt using 6-year rule

    In particular, what have you done to convince ATO in regards of point 2?

    Thanks in advance
     
  2. thatbum

    thatbum Well-Known Member

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    Why would ATO need convincing about point 2? I would have thought points 3 and 4 would be key.
     
  3. Marg4000

    Marg4000 Well-Known Member

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    Unless you can prove a radical, sudden and dramatic change in your circumstances, to decide after one week you can't afford to live there is hard to believe.

    A PPOR is just that - a principal place of residence. You can't claim residence if you don't live there for more than a few days.
    Marg
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Point 2 is a mute point.

    You holiday in places for longer than that and can't call them your ppor.
     
  5. Beelzebub

    Beelzebub Well-Known Member

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    Move in for six months before you sell it.
     
  6. Ed Barton

    Ed Barton Well-Known Member

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    What difference will this make?
     
  7. Beelzebub

    Beelzebub Well-Known Member

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    You need to have lived in the property for six months and owned it for 12 for it to be considered a PPOR and thus exempt from CGT.
     
  8. Terry_w

    Terry_w Structuring Broker and a Structuring Lawyer Business Member

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    I disagree with this. Legislation does not have these time limits
     
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  9. Beelzebub

    Beelzebub Well-Known Member

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    Well there you go: I always thought that was the rule. There hasn't been any ATO or judicial rulings that shed light on what is a reasonable time? I certainly know I've heard the six month rule several times before?
     
  10. Terry_w

    Terry_w Structuring Broker and a Structuring Lawyer Business Member

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    Time is only one factor that is conisdered. there is an old ATO ID on the factors they take into account when determining whether a property is a main residencce or not
     
  11. The ATO can (and will) call BS on an apparent scheme to obtain the MRE to obtain a tax benefit. The Commissioner has the power to make his own mind. And doesnt have to defend it unless you take them on. The onus is on the taxpayer to demonstrate that the home was the taxpayers main RESIDENCE and was occupied. There are plenty who try (and fail) and get done for making a false statement. The penalties just get bigger. One little lie becomes a bigger one.....

    There are examples of taxpayers who fail because they lie and think the ATO don't check. ATO auditors have a job that includes checking for lies. There are genuine taxpayers who move out soon after moving in - A reasonably arguable position and facts will determine if the ATO call it out. The onus is then on the taxpayer to object / appeal etc.

    If the residence is newly constructed / renovated then there may also be a 3 month requirement !!
     
  12. Johnny Smith

    Johnny Smith Member

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    Is there a list of what it takes to comply? Also, would getting an investor loan for serviceability reasons mean you instantly cannot qualify for the 6 year rule even if you moved in regardless?
     
  13. You must move in and fully occupy the property as your home with your property and possessions and at the time you moved in must have intended that the home would be your home for a forseeable period of time with no immediate plan to depart. Your family (if you have one) must all move in and occupy also. Evidence that you did this may include occupancy accounts for power, water and actual use of those services - The AAT have cases on appeal (unsuccessful) where they found the meters hadnt even turned. Even stories from people who claimed to be in a house while they were interstate !! Data and phone connection, electoral roll and postal information, updating licenses and other records. However just changing addresses itself doesnt prove occupancy and intent. remember it is called the MAIN residence exemption....Mere occupancy isnt enough. You must reside

    I have had a client move out after a few days. He had proof of moving in (Army paid for his relocation into his home) and his reason for leaving was very clear - He was given orders to move interstate given a few days after he moved in. We retain all this on file. The shorter the period the more circumspect the ATO will be. If you moved in and then moved out as a charade you likely have not satisfied the main residence test and so absence will not count.

    Relevant factors (which should not be considered individually as acceptable)
    • length of time lived in dwelling
    • family ?
    • belongings
    • mailing address
    • electroral roll
    • services connected
    • intentions
    • free choice v's obligation to sppend time at another residence (ie jail)
    • actual occupancy v's intention only. ie you MUST commence to reside
    Question - Did you rent out the property prior to moving in and so you moved out ? This has also been found to affect the MRE on review.

    The residency status for a loan has no bearing BUT if you tell the ATO its owner occupied and tell a lender its investment that inconsistency could pose a question. Same as what you tell a lender
     
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