Buying land with 2 Houses - PPOR - 1 house rented out

Does anybody know the tax implications of buying a PPOR which has a second residence on the land and the second residence is rented out at the time of purchase?

The main residence on the land is the PPOR, the second residence is for income.

I guess in this case the first use is mixed PPOR and rental so the CGT would apply to a proportion of any capital gain upon selling in the future?

If the second dwelling was not rented at the time of purchase but was later rented for less than 6 years then would the entire profit be CGT exempt using the 6 year rule even though only the second dwelling was rented rather than the entire place?

 

You need a registered valuer to advise how to apportion the acquisition costs into the two parcels. That % is also then used for loans etc. Its a fairly important first step. Only a reg valuer has the skills to apportion non-homogeneous land into these portions. You will probbay now ask - Can we just get avalue for the house and land and deduct from the total ? No. It doesnt work that way. The original costs must be apportioned and the ATO valuation rules require a reg valuer to split it.

The normal process is you seek a valuer and tell them what you paid (incl all duty, legals etc) and ask them to advise on how to split into the two parcels.

The second dwelling is not covered by the main residence exemption. The fact it is not fully occupied as the main residence is the fatal element. In some instances if the WHOLE property was used a family home across two dwellings this may allow some different outcomes but eventually when the use changes the same problem reoccurs. You would still need the split for now.

Personal tax advice is required, you could have costs which will reduce any CGT impact.