Capital Gains Tax

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

 

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

 

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

 

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

 

Thanks for your reply.

 

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

 

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.

 

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.

 

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

 

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

 

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.

 

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