Join Australia's most dynamic and respected property investment community

Capital Tax

Discussion in 'Property Finance' started by eng, 12th Sep, 2016.

Tags:
  1. eng

    eng Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    114
    Location:
    Macarthur, NSW
    If you move out of your PPOR and turn it into a rental, and the propertys valuation was say $300K. Say you sell it 10 years later at $600K, will capital tax be payable at $300K or $600K?
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,589
    Location:
    Sydney or NSW or Australia
    Depends on other factors.
    • Are you moving to another ppor?
    • When?
     
  3. eng

    eng Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    114
    Location:
    Macarthur, NSW
    No just trying to understand it. And maybe using it as a strategy if it makes sense.
     
  4. eng

    eng Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    114
    Location:
    Macarthur, NSW
    Sorry I should add that the purchase price was say $250K. So would CGT be paid at the purchase price, or when I got the valuation and decided to turn it into a rental?
     
  5. Sonamic

    Sonamic Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    956
    Location:
    Sunny QLD
    I would think it would be from the value on the date you nominate your next PPOR and use the 6 year rule on the new one. Otherwise if you move out and rent you have 6 years of growth up your sleeve CGT free.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,043
    Location:
    Sydney
    You would have to work out the cost base.
    If you are moving out of the main residence this would be the value at the time it started producing income.

    But there may be other factors to consider.
     
    eng and Sonamic like this.
  7. Jerry O

    Jerry O Well-Known Member Premium Member

    Joined:
    21st Jun, 2015
    Posts:
    362
    Location:
    NSW / Melbourne
    just purely based on these numbers. I would say the income producing years would be from 300k now to 600k in 10 years time. and CGT applies to the 300k gain when you sell.
    the 250k purchase price to 300k capital gains would be exempted due to it being your PPOR.

    but again, its not that simple in actual calculation. and as Terry mentioned, a lot of factors to consider.
     
    eng likes this.
  8. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    222
    Location:
    New York
    If moving into another PPOR then yes its your Sale price in 10 years from now $600k less than value today $300k x 0.5 = 150k gains

    BUT you need an official valuation of todays value.

    If you DONT move into another PPOR eg you go and rent somewhere OR you move overseas etc then you get an additional 6 years as you don't have another PPOR eg so you would pay capital gains tax on 4/10X300k = 120k x 0.5 = 60k gains

    (but make sure you move back to Australia before you sell otherwise you lose the 0.5% discount).
     
    eng likes this.
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,043
    Location:
    Sydney
    Some inaccuracies there Dean.

    CGT is not calculated on moving, but on the sale of a property.

    An official valuation isn't needed. Market value can be estimated by other methods such as a real estate agent.

    The discount is not 0.5% but 50% and even if you move back to Australia at the time of sale the 50% discount won't apply for the period while you were overseas as a non resident.
     
    eng likes this.
  10. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    222
    Location:
    New York
    lol yep sorry of course meant 50%......had 0.5 in the calculation then went back and added % without changing the value. ooops.

    Interesting about "real estate agent" offering valuations.

    I was told by "tax professionals" had to be written valuation by professional valuer.....eg couldn't just be an agent writing that based on XYZ sale we feel the value is XYZ etc.

    BTW Eng not going to add any further info but article here - Hidden capital gains tax traps you may not know about
     
    eng likes this.
  11. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    222
    Location:
    New York
    eng and samiam like this.