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Capital Gains Tax

Discussion in 'Accounting & Tax' started by Ben Murphy, 26th Sep, 2015.

  1. Ben Murphy

    Ben Murphy Member

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    Hi Guys,

    I am new to this site, so would appreciate any assistance in understanding the following rules that are applied to CGT around this scenario -

    Sold home and bought an investment property which we have rented out for the last 5 years, and have never lived in ourselves. During this time we have rented and do not own any other properties but want to sell this investment property and need to how long we need to move back into this investment property to avoid CGT. Is this even possible? Or is their no way of avoiding pay cgt under these circumstances?

    Once again thanks in advance for any help it is very much appreciated.

    Kind Regards,

    Ben
     
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  2. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    This current investment property has never been your PPOR. So when you sell, it will always be subject to CGT.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You can never avoid CGT on this as it was rented out from the beginning.
     
  4. Ben Murphy

    Ben Murphy Member

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    Thanks terry, how long do you need to live in it at the start to claim it. Cheers, Ben
     
  5. Ben Murphy

    Ben Murphy Member

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    Thanks for your reply.
     
  6. Ben Murphy

    Ben Murphy Member

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    Do you know how long do you need to live in it at the start to claim it. Cheers, Ben
     
  7. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    There is no specified time. Technically you could move in as your PPOR on day 1. Then get a job transfer and have to move out on day 2. Then you'd be able to rent out for up to 6 years and not have to pay CGT.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Once you do live in it then it would only be exempt for that time onwards based on a % of time basis. So it you live in it for a year then only 1/6 would be exempt roughly.
     
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  9. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    Hey @Terry_w,
    So if I only lived in the property for 1 day and then got a job transfer, like in the example that @Propertunity gave. Does that mean I'm only exempt from CGT for 1 day out of the 6 years?

    And second question: If I lived in the property for 1 out of 6 years, but on the year I lived in the property, there was 20% capital growth in the property, and in the remaining 5 years there was no growth - do I get exempt for the 20% growth the property had in the year I lived in it?

    Hope this makes sense?


    Cheers,

    Taku
     
  10. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    It depends. If you are not claiming another PPOR then you would probably be able to stay CGT exempt under the 6 year rule.
     
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  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes


    No. Just a percentage on time.

    This is why it is better to live in a property before renting it out. The 6 year rule could then apply. If not then the value at the date moving out would be the cost base - roughly.
     
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  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    it needs to be established as your main residence. No time limits.