Capital Gains Tax - Valuation Needed?

Hi all,

Our future PPOR is currently rented and we will need to pay some CGT if we ever sell.

Is the time rented percentage simply calculated over the whole ownership time? Do we need to get a valuation of the property when we decide to move back in or is it irrelevant?

Thanks

 

need a valuation when it first became income producing.

 

Thanks. Valuation at purchase should hopefully suffice.

 

Was it rented from date of purchase,or did you move in and live there first? So was it your PPOR at the time?

 

It seems its always been an IP and will become a PPOR...Valuation is not needed. Pro-rata basis is required. ONLY a property that has always been a home and 100% exempt may need a val when it first produces income

Key trap is some costs when you reside in the property need to be captured to reduce future CGT !! When you reside there you need to record the annual costs of owning the property that arent tax deductible ie rates, interest, insurance etc. They will reduce the overall "profit"that is then pro-rata. Most people dont know that and arent told. Good you asked the question.

These issues are explained in our My Property CGT Record tool which is available to clients (free).

.

 

Excellent, thanks Paul.

 

Hi Paul, just clarifying, if valued at time of first rental after being a PPOR from purchase, do you still need rates, interest expenses whilst it was your PPOR?
I thought they would not be deductible and CGT cost base would be based from the valuation at the time it was first rented and all costs from then on deductible?

 

thats right wont be able to claim third element costs along with the reset cost base.

 

From your description that isnt your position however ?
You bought a property that has always been a IP and will become a PPOR. There is no costbase reset. Historical cost is the costbase and pro-rata CGT applies. 3rd element costs apply once you occupy.

For taxpayers who satisfy s118-192 (ie was their home and market val applies at date first produces income) then you dont look prior to the date the property first produces income. The market value at that date is effectively a start date for CGT thereafter.

A common question is - what happens if we move back out and back in again another time. This just affects taxable v's exempt days in the pro-rata. No valuation etc issue. s118-192 is a one off event. And yes the 3rd element costs in the new exempt period continue to apply. And perhaps even a 6 year main residence absence exemption ? So what would otherwise be taxable days may still be exempt days (if you elect to do that)

 

Thanks Paul - but that's round the wrong way - PPOR from purchase then becomes an IP.

As per Michael's answer - can't claim 3rd element costs.
I Reset the cost base when first became an IP.
I didn't think so re claim interest, rates etc whilst PPOR for cost base but thought I'd check with the experts.

Thanks all

 

Ahhh - I had you mixed with the OP. Yes....So s118-192 applies and no 3rd element costs as Mike says.

Tip : The valn does not need to a reg valuer...Find the agent with the high end val. You can even DIY if you can gather and evidence enough recent sales data and keep that on record.

 

Good tip Paul - I actually obtained 2 written vals from REA's including comparable sales to support appraisal to be used for the CGT valuation.
From previous bank vals I found valuers were between 15-30% low.

 

Is that right that a professional valuer is not needed and real estate agent can do a written val? thanks

 

hi guys - we had moved out of our property in March 2017 and were renting. We have just bought and moved into our new primary residence. For CGT purposes when we were to sell our now investment property - i hv got an market appraisal from an agent. Is that good for CGT purposes or we need to get a proper valuation done. ATO website is so unclear on this.

regards

 

Ppor prior to march 2017 ? Then became an IP ?

First used to produce income rule. Val required march 2017

If agents val represents market value at that time it is fine. I havent seen ATO argue against an agents val as yet although possible i guess.

 

Suggest you also ask that written val(s) from RE agent(s) include comparable sales if you're nervous. It strengthens your position further but as Mike mentioned it's not necessarily required.

 

Thanks. The agent letter has got comparables from March - May 2017 but calls it a market appraisal (not valuation) as at Dec 2017.

Given between Mar n Dec we were renting - can the agent appraisal at Dec be used or it is has to be at Mar 2017

 

thanks. 4 comps are included with agent noting mkt appraisal of x-y range (range of 3%)

 

Thats quite sufficient in my opinion. Youve taken all reasonable care.

As long as the market didnt move wildly in 3 months then i would think it is represenative but just do some research yourself on corelogic or any real estate site that gives past sales to see if fairly reasonable.

 

thanks Michael.