A few quick questions on the 6 year CGT rule.

Hi all,

We are in the process of selling our PPOR that we purchased 7 years ago. We moved out about 3 years ago after living in it for 4 years. IT has been rented out continuously for the last 3 years. In that time we bought a house in Brisbane and Sydney - both were rented from day one.

Do we need to do anything with the ATO or any other agency to confirm that the house is still our PPOR? Will the exemption be automatically applied after we sell it?

Thanks in advance.

 

no

 

Your main residence exemption is something you can choose (if you have a choice !!) when you lodge a return.

The Brisbane and Sydney properties cant be a main residence but the FORMER main residence met the criteria as you lived in it then have been absent for under 6 years. So if its sold you would claim the CGT main residence exemption by NOT including a CGT event in the tax return.

No forms or notification needed.

For land tax its a different matter. Depending where it is and its value you may wish to register to avoid missed liability which gets detected when sold. Land tax requires the owner to register and is administered by the state Office of State Revenue.

 

Sounds good, doing nothing is what i do best.

Thanks Paul.

 

@Danieljk101 -thx for starting this thread. I also purchased my 1st home in 2012 as a 1st home buyer and moved in the first 12 months (it was rented out initially for 6 odd months).

Due to changes in the Job, we have just moved out on April 2018 and started renting close to work.

We are considering to sell(no capital gain and we can buy somewhere else) but given the propsrty market is bit slow hence we are also tossing the idea about putting it on rent.

My Questions:

A. Under the 6 year examption rule will I be paying CG tax if we do not sell now and put it on rent and sell in future (with in next 6 years) and buy anotger property to live in?

B.Under the 6 year examption rule will I be paying CG tax if we do not sell now and put it on rent and sell in future (with in next 6 years) and keep renting?

Note:We do have other IP's where we have never lived and always classify them as an IP.


In relation to @Paul@PFI land tax comments (mentioned above) -what do I need to know about that or any direct affect in my case as my property is not very big.

Edit:If we do put our home on rent, will tgere be any extra things I need to do at EOFY tax return or will I be still able to claim all tge expenses like an IP?

 

Warning.

There is something you need to do.

On the capital gains tax schedule on the tax return it asks if you have applied an exemption and one of those is the main residence exemption.

Dont fill that in and ATO will strongly argue you didnt make the choice when lodging your return.

I disagree @Paul@PFI it is included with a nil capital gain and the main residence exemption applied being ticked. That was an issue that came out during a voluntary disclosure i worked on.

Section 18M capital gains specifically asks if you have applied an exemption or rollover. By ticking N because you said N to capital gain it would be evidence you havent applied the main residence absence exemption. I wouldnt be advising that.

 

A. It could potentially be exempt
B same

Land tax applies as the property is rented, but if your holdings are under the threshold there may be nothing to pay.

 

Thanks @Terry_w And @MikeLivingTheDream

Now I need to decide, how many days I should wait for it to sell and then pull the pin to put the property on rent. Bcoz sitting idle in market waiting for a buyer-it is chewing money too.

 

@L3ha7 Check with your accountant. Since you rented the property before establishing it as your PPOR you may be liable for some CGT.
Marg

 

Thx @Marg4000 , my understanding was that if you live at a place more than 12 months as your ppor (even after initial renting out) then you don't have to pay CGT.

But I will investigate.

 

Thats incorrect.

 

What is this understanding based on?

 

I believe I have read somewhere hence I will investigate

 

Can save you investigating any further. It isnt correct.

It will be subject to CGT on a proportionate time basis. 6 months (or whatever period you initially rented it out) divided by the total period of ownership will be the percentage subject to CGT.

Third element costs will reduce the capital gain.

 

@MikeLivingTheDream Much appreciated

Tax tax tax hummmmm

 

Thats a horrifying way to refer to a tax law.

 

Apologies @Trainee , I am still learning the ropes and I have been thinking since I put this up and I spoke to someone who also said one must live for 4 years after renting out to get exemption from cgt.

I am not subject natter expert therefore I will listen to the experts. If I have to pay for thise 6 months then so be it but if I put it on rent, I can atleast get exemption for 6 years but we are more pro selling though

 

Definitely not CGT exempt merely by living in it.
Perhaps you are thinking of the 50% CGT discount rule - if you hold an asset for 12 months the CG is reduced by 50%.

 

And maybe the 4 year rule is the rule regarding periods before construction.

But you have already constructed it and then rented it out. So that rule doesnt apply.

To be honest ive heard many crazy things.

Had someone come in once who was told by an accountant that if you purchased shares in a company holding land the cost base of the asset in the company was reset to market value. I told them get that opinion in writing. A barrister and i had a good laugh about it. He said would be a wonderful tax minimisation strategy if true. It wasnt true.

 

Wrong again.

If rented first, nothing you do will alter the fact that you will be up for some cgt.
Live there for 40 years or more wont alter that.

Better get professional tax advice rather than listening to “someone”.
Marg