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Calculating CGT exemption

Discussion in 'Accounting & Tax' started by Valentino, 17th Sep, 2016.

  1. Valentino

    Valentino Active Member

    Joined:
    21st Aug, 2016
    Posts:
    37
    Location:
    NSW
    we are thinking of moving out of PPOR to buy a bigger place as new PPOR but still keep the first (which would then become ex-PPOR).

    If we live in new PPOR, is the old one CGT exempt for six years? Or does it only apply if you are not in another PPOR eg renting.

    If yes, How do we work out how much CGT we'd save with the six year CGT exemption?
    Is this correct:

    Let's say house is worth 500k, to keep maths easy.
    Doubles in ten years to 1 mil...lets assume for sake of the exercise.
    So, every year it goes up $50,000.

    So within those six years CGT exempt, the value has gone from 500k to 800k.
    Profit for that portion of time is 300k.
    Taxed on half of it, ie on 150k.
    30% marginal tax rate on 150 is $45,000.

    Right?

    Or...?

    Ta
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
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    Location:
    Sydney
    You can only claim one place as the main residence at any one time, but either the old or the new could be claimed. The time you have to decide which to claim is when you sell either of them.

    You would then choose to apply the exemption (in full or in part depending on when) to the one that would save you the most tax.

    So just carry on and assume CGT will apply to both - so that you keep all receipts etc.
     
  3. Valentino

    Valentino Active Member

    Joined:
    21st Aug, 2016
    Posts:
    37
    Location:
    NSW
    Thanks Terry.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
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    Location:
    Sydney
    As an example:
    Rented the place out for 1 year, Lived in it for 1 year and rented it for 5 years before selling:

    total years owned = 7
    Total years main residence = 6

    The taxable capital gain will be calculated on 1/7th of the 'profit'.