CGT Liability

Discussion in 'General Investing Discussion' started by mkbonline, 10th Aug, 2019.

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  1. mkbonline

    mkbonline Well-Known Member

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    I purchased 2 bed townhouse as my PPOR in Dec 2010 for $320K in Toongabbie NSW. Lived their till Feb 2015 and then moved to overseas with a new job. I came back to Australia in Nov 2016 and was renting out in a different suburb till Dec 2018. I brought new place and move in Dec 2018. Old PPOR (Toongabbie) is rented out since April 2015 (more than 4 years now).Current estimated market price is $570K.

    I want to sell it and invest money in offset account of new PPOR. .I have consulted few tax agents but getting conflicting advise regarding CGT liability.My question - Will I have CGT Liability if I sell old PPOR?

    Cheers,
    Manish
     
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  2. Hodor

    Hodor Well-Known Member

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    You will need to pay CGT on any growth after you moved into the new place (Dec 18). You can still claim the the CGT free period for up to 6 years after moving out provided you don't claim another house as your home.

    I don't believe been overseas for a period has any effect on the CGT free rule although I have never needed to look it up to confirm.
     
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  3. Hodor

    Hodor Well-Known Member

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  4. mkbonline

    mkbonline Well-Known Member

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    Thanks for the link. I found one very relevant example.

    " James bought a house in Brisbane on 15 September 2010 and moved in immediately. On 10 October 2012 he moved to Perth and rented out his Brisbane house. On 3 October 2017 James bought and moved into a new house in Perth. He sold the house in Brisbane on 1 March 2019. In completing his 2018–19 tax return, James decided to treat the Brisbane house as his main residence for the period after he moved out of it but only until the date he purchased his new main residence in Perth – that is, for the period of slightly less than five years from 10 October 2012 until 3 October 2017."

    So looks like that I have to pay CGT for Dec 2018 onward.

    Luckily prices have not moved upwards since that time.

    So now, the question is - who decides market rate of my property in Dec 2018?
     
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  5. Hodor

    Hodor Well-Known Member

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    Ideally you got a market appraisal. I believe there are other methods, I'm not sure of the details.
     
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  6. twisted strategies

    twisted strategies Well-Known Member

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    i am no tax expert but i would go for TOTAL buying costs ( cash, commississions stamp dutuy , lawyer's fees and mortgage costs , if any etc. etc ) v. the total cash left after selling ( minus commissions , advertising , expenses in tidying up the property for sale , etc )

    if the property prices went 'nowhere ' maybe you have crystallized a loss , but you would have to get your accountant to ascertain that to ATO's content , buying as a residence intially and THEN renting it out later adds some extra complications ( did you have a 'home office ' there when you resided there )
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

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    Could be CGT free potentially, but it will depend on the circumstances.
     
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  8. mkbonline

    mkbonline Well-Known Member

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    I plan to live at least 10 years in the new property, so i expect it to appreciate more than Toongabbie house.

    Now if i sell in Oct 2019 and dont extend the main residence absence provision to Toongabbie property - will I pay CGT from for price increase since May 2015 (when i move out of the property for overseas) OR will I pay CGT from for price increase from Dec 2018 (when i purchased new PPOR) ? My assumption is that I will not pay any CGT for the new property when i sell it in 2029.


    Cheers,
    MKB
     
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  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

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    are you talking about toongabie?

    You have a choice.
    a) cost base reset at first used to produce income, or
    b) use the 6 year rule
     
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  10. mkbonline

    mkbonline Well-Known Member

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    If I use 6 year rule - do i have to pay CGT on my new PPOR when i sell it after 5-6 year from now?
     
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  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

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    yes
     
  12. mkbonline

    mkbonline Well-Known Member

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    I plan to stay in new PPOR (which purchased in Dec 2018) for a long time (potentially 10 years) - so $ gain is likely to be much more. So it may not make sense to pay CGT on it.

    If I pay CGT on old PPOR - the cost base of CGT will be when i used it to generate income i.e May 2015 or when i brought the new PPOR i.e Dec 2018.

    Between May 2015 and Dec 2018 - I was renting in US and Australia.

    Thanks for your help
     
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  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

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    The formula in s118-185 would be used on the new main residence

    s118-192 would be used on the old if not using the 6 year rule.

    I suggest you get some tax advice.
     
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  14. mkbonline

    mkbonline Well-Known Member

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    Any recommended tax agent , who can help in this issue? I am based in kellyville , NSW
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

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