Buy property as investment but move in as PPOR for CGT

Change of heart was placed in inverted commas to show the fiction. Obviously the excuse would need to be better. And obviously the period wouldn't be one or two weeks - you wouldn't be able to list the property for rent until you had at least moved in for a few weeks - so you might be in it for 1-2 months before moving out. It can't be hard to formulate a legitimate excuse - I can think of plenty. In no way am I endorsing the defrauding of the ATO. This is in no way legal advice.

 

I hear a lot (a real lot) of PCers ask this issue and frankly its not as easy as a week or two. That real hard to do. But can a person legitimately move in and then move out. Yep. There isnt a specific period but there are loads of tax`appeals that get rejected...or dont bother when they encounter the ATO question them.

My suggestion is if its seems like a dodge...it probably is.

Some guidance on this one....Fee free guidance.

1. If you need to ask before doing it then its probably not legit
2. If you dont move everything in or eat at mum and dads its also probably not legit
3. If you post on PC before doing it read #1 above.

But there are loads of reasons to move out genuinely after a short period. What is your reason ? And if you do use it how do you prove that ?

 

What about this scenario.

You own your current home and decide to upgrade and keep the previous PPOR as an investment.
You never declare the new home as your PPOR and keep the previous home as your declared PPOR and you have a PO box to collect all your mail.
You sell the first PPOR after 5.5yrs. Is the sale of this first PPOR now CGT free?

I.e. If you purchased your new PPOR in 2012 and then sold your previous PPOR in 2017, could you get the benefit of selling an investment property CGT free and then also have the benefit of 2 properties riding the boom tax free.

 

First part is fine, under 6 year absence rule. You get to choose which property it applies to. If your first PPOR was not tenanted before you moved in then there is no CGT.

You only ever claim one PPOR exemption at a time. If you claim the exemption for PPOR 1 then the next PPOR is subject to CGT whether it was a PPOR or not.

Only exception is if you owned a property prior to 1985 which will always be CGT exempt. In that case you can establish another PPOR and have the benefit of two CGT free properties.
Marg

 

Ive written about this in my strategies series. The end property wouldn't be cgt free though unless it was your main residence at death.

 

There is no "declaration" of main residence. Facts are applied to tax law.
For land tax purposes a home may need to be advised as the principle place of residence to be exempt.

 

The pre-CGT property retains its CGT free status whether it was lived in, a home, a investment or not. That issues terminates on death And yes if they own another post-CGT property and it has been their home it is tax free up to their death. Strangely most older people who this applies to will continue to live in their pre-CGT home and refuse to move !!

Estate taxation needs to consider more issues and is a common reason for the executor to seek tax advice on the consequences of death. While there is no "death tax" here they are many ways tax impacts deceased estate proceeds, property and beneficiaries.

 

Guilty!

But I like it here!!!
No plans to move.

But it is an option if we choose to downsize......

Marg

 

What if you moved out because the house was haunted? Sounds like a good reason to me!

 

I am curious about this in the context of the earlier discussion about moving out of a main residence for legitimate reasons. For example, if I genuinely occupy a property I own for 3 or 4 years, I can claim it as my main residence. If I subsequently move out and rent it out I can continue to claim it as my main residence until I sell it 5 years later. I am not required to provide a reason for moving out. It is a fact that I genuinely occupied and it is a fact that I moved out. Do ATO even ask for a reason for moving out?

 

I don't believe in ghosts, so that won't work. What if I just don't want to live there anymore? I have moved out of houses before just because I wanted to go live somewhere else.

 

I just re-read the posts and the discussion was about short stays. I can see how moving into a house, living there for a short time and moving out then claiming the main residence exemption at sale could look like a tax dodge and raise questions.

 

What if your spouse believed in ghosts?

 

That's a deal breaker

 

No but a lack of purpose and a very short period of time indicates a potential risk that the taxpayer has painted their own picture. There are countless valid reasons why people move out in short periods of time. It just means the ATO look deeper to find a lie. If there is no lie its no concern.

They generally seek evidence of occupancy in water, electricity and other such charges. If the meter isnt turning they probably wont believe you and accept your story as a misrepresentation. There are offences for misleading ATO officers !!

The reason that you are homesick, scared of spooky ghost noises and hate being alone are all valid if your intention was to live there and you actually did move in in full . One I saw the guy hated living alone and hated it so much after 2 months he moved out and triggered repayment of the first home duty concession. I would think ATO would see no mischief in that. But if he tried that after three days I would question if it was a legit occupancy too unless there was a good reason for him to move out (structural failure of the floor, move cities for work, he had to go to rehab etc)

 

Makes sense @Paul@PFI. I could see how moving out very soon after moving in would raise questions. I was thinking more like 3 or 4 years as a minimum stay.

 

Subject to budget changes (?) then no issues of concern at all

 

I'm pretty sure the 6 year rule requires the property to a PPR from date of acquisition.
Checking in with @Paul@PFI , @Terry_w @Ross Forrester ?

 

I'm pretty sure you are wrong and Paul , Terry and Ross are correct.

The main residence (no PPOR mentioned in law) exemption says you must have occupied it as the main residence and then you are absent. A former IP is also eligible provided you then occupy it.

Of course the exemption only applies for the period you occupy and theafter for UP TO 6 years after you are absent (ie rent it out again) but after say 5.8years you can move back in and stay a bit then do it again. Another period of up to 6 years

 

No NeK, you are thinking of CGT-free status on sale which requires PPOR status from date of acquisition (among other things).