Another 6 year PPOR exemption topic

Discussion in 'Accounting & Tax' started by Nem, 30th Nov, 2018.

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  1. Nem

    Nem Well-Known Member

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    Good afternoon all, its all happening for us!! Thanks to Michael Xia and his team, we managed to get the loan for our new home in QLD without selling our Sydney PPOR and instead adding it to our investment portfolio.

    I would like to clarify a few points here

    1. Sydney property is getting rented out so get valuation for Sydney house from bank, valuer and RE agent and choose the highest one to keep for CGT purposes for the future

    2. Keep all acquiring costs expenses for QLD to increase purchase value

    3. Since working from home claim proportion of QLD interest and other holding and running expenses on tax return as QLD will always be subject to CGT

    4. Select Sydney as PPOR for another 6 years, get valuation done again at that time

    5. Sydney if sold in 15 years so 2033 will be proportionally calculated (lived in here for 9 years, add 6 more years claiming PPOR so 15 years PPOR and 9 years investment) – owned for 24 years, for example:

    Taxable gain $500,000
    50% CGT discount to be applied = $500,000 x 50% = $250,000
    Only 9/24 of this would be taxable = $93,750

    6. How to calculate taxable gain? Valuation today or valuation in 6 years time will be deducted from the sale price?

    7. Land tax payable?? Sydney or QLD house exempt for next 6 years??

    Please let me know if I understood this correctly or am I missing something and what else can help to reduce CGT either in QLD or on Sydney property?

    Thank you very much
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yep you are missing a few things and misunderstanding others. See my tax tips and get some specific advice.
     
  3. Nem

    Nem Well-Known Member

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    Hi Terry, thanks, the above is from your tax tips, they are such a great help, I thought I understood it right... what am I missing?? or misunderstanding?
     
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    1. Yes
    2. Doesnt increase its value. You are merely recording its cost base
    3. Working form home doesnt allow you to claim a % of ownership costs. Home must be a place of business. PAYG workers cant claim.
    4. Well, that may be a choice to make later. Both QLD and SYG may be eligible for exemption in the first 6 years. BUT not both. Make the decision later
    5. Refer to 4, above. Could be pro-rata or could be 100% taxed since the date it first produces income.
    6. Depends. Valuation in 6 years is irrelevant and of no regard
    7. It is taxable property and it depends on the land tax threshold for the owners. There is no absence concession. Land tax has a strict requirement for it being your home. That isnt met after moving out.

    Tip : Personal tax advice to avoid mistakes and errors. You have indicated a partial understanding of some matters and misunderstanding for others
     
    wilso8948 and Terry_w like this.
  5. Nem

    Nem Well-Known Member

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    Thank you Paul, it does clarify few things, you are right, I don't need to decide which house to claim as PPOR for CGT purposes until after 5 years??

    Regards to land tax, is that regardless of CGT purposes PPOR classification? Meaning if I live in QLD and since I have other properties there and will be over threshold, I would claim that house, as home so, would be exempt for land tax purposes, would I be able to claim Sydney house as PPOR for CGT purposes for next few years (if I decide to)?
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You only need to decide which house to claim as the main residence at the point of the sale of either one of them.

    Land tax is state legislation and has no connection to commonwealth tax. separate laws. One property could be your main residence for CGT purposes but not the PPOR for land tax purposes.
     
  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Land tax laws adopt a strict requirement that is your (and your partners) ONLY residence and it must be the principal residence. If your partner owns it that means you cant claim elsewhere. CGT rules allow you to move out and often claim an absence concession. But it is time limited and a exemption can only ever commence with actual occupancy - Not just ownership or an intention that isnt fulfilled. Land tax is far less generous than CGT.

    The decision for which is exempt for CGT is best deferred until you consider selling either property and if its in 8 years time that means Sydney has a max 6 years available. If the one you are selling is a loss why claim the exemption ? But this raises a issue with third element costs. Its wise to always records ownership costs annually even for your own home. If its needed in the future. I just did calcs for a owner today and found a $100K tax saving. But they need to reconstruct 15 years of costs for the property (never rented out)...But it doesnt meet requirements of a main residence either. .

    I have seen many people elect to be taxed on a small CGT gain in QLD to preserve the 6 years on prime Sydney property. Calcs can be done at that time.
     
  8. Nem

    Nem Well-Known Member

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    That's great, thank you Terry and Paul
     
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  9. Dileepa Fernando

    Dileepa Fernando New Member

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    Hi Terry ,This is my case. Appreciate your valued advice.

    1/06/2014 Bought the house at Roxburgh Park

    15/12/2014 Rent the house at Roxburgh Park following an accident and went to live with in-laws. Then lived interstate. (Through out the Roxburgh park property is on rent till now and have declared all income I received with my tax returns)

    1/01/2018 Moved back to Melbourne and bought the second property in Craigieburn and currently living in this property since Jan 2018.


    If I move back to my first property in Roxburgh Park now, will I be able to claim it as the primary place of residence.

    Will I be able to qualify for CGT exemption with the 06 year rule in case if I stay there (Roxburgh Park property) for the next 12 months or more before I sell it?

    Thanks.
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    possibly, it will depend on the details. You should seek tax advice on if you can and what the consequences could be.
     
  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The properties will have either / and / or a pro-rata CGT issue and options concerning exemptions and even valuation of Craigieburn (and Roxburgh Park) to consider. Claiming an exemption on RP may be available BUT it may also affect the CGT issues for Craigieburn. Understanding that impact would be suggested so the correct CGT choice is made after selling. The MRE may be fully or partly available to either property...Calcs may be needed.
     

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