Capital Gain Tax question

Discussion in 'Accounting & Tax' started by G4nt3nK, 2nd Jul, 2021.

Join Australia's most dynamic and respected property investment community
  1. G4nt3nK

    G4nt3nK Member

    Joined:
    22nd Jun, 2015
    Posts:
    14
    Location:
    Australia
    Hi all,
    hope I can get some help with regard to my confusion about capital gain.

    Say I have a property A which was purchased back in 2010 and been living on until around 2018 where we rent it out until now.

    We purchased another property B around end of 2017 and been living on it since.

    My question is, if I decide to rent another property and live in it.
    Then I rent out property B.

    If I sell property A afterward will I be exempted from CGT ?
     
    Last edited: 2nd Jul, 2021
  2. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    It could be exempt, depending on the circumstances.
     
  3. Paul@PAS

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

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    Either could be exempt. Assuming A was perviously 100% exempt until you departed.

    A would have a new costbase at the market value when first rented. It could be claimed using the absence rule (up to 6 years) for the period after actual departure. If you do this then...
    1. No exmption for same dates for B...and
    2. Pro-rata then applies forevermore to B....With the first XXX days (used as exempt in A) always taxable but this will diminish as a % over time. One benefit of this method is you can forever add non-deductible ownership costs (thrid element costs) while you live in B so the costbase will increase forever ...so a high costbase then subject to a XX days divided by total period of ownership as taxable

    You need to do calcs to compare merits. Many fear the impact on B when it may even be trivial over 20 years and with 3 rd element costs.
     
    craigc likes this.
  4. akira

    akira Active Member

    Joined:
    18th Jun, 2015
    Posts:
    25
    Location:
    Brisvegas
    With the new costbase for property A, can you still deduct the acquisition cost?

    Thanks
    Akira
     
  5. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    no
     

Buy Property Interstate WITHOUT Dropping $15k On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia