CGT on partially rented out IP

Discussion in 'Accounting & Tax' started by Manda123, 2nd Aug, 2020.

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  1. Manda123

    Manda123 New Member

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    Would really appreciate your advice on what CGT implications I am up for if I was to sell this year VS holding onto the property for longer?

    Details of property:
    - Purchased property early June 2011 for $370k (contract date late April 2011)
    - No stamp duty as I received first home owners grant exemption, but $2k legal fees
    - Made property PPOR straight away and moved in whilst I did renovations to the property, new carpets, changed layout from 3 bed to 4 bed, new kitchen, new driveway, added decking to the front and back of the house using additional home loan of $40k (lived in property 2011-2014)
    - From 1st July 2012 claimed 75% as rental income whilst I lived in 25% of the property.
    - From Dec 2014 rented out the property at 100% with the property still currently rented now.
    - Although income producing, 7 of the 8 years has been at a loss, with a total loss over this period claimed on my tax at $40k
    - Currently property is valued at $650k
    - I dont own any other property

    Questions:
    1: Can I claim the 6 year rule for only 25% portion as I only moved out of the property in Dec 2014 if I was to sell by Dec 2020?
    2: As i never had a formal paid valuation done (foolish I know!) prior to renting it out partially in 2012 in fully in 2014 I assume I have to just base the costing off $370k purchase price, can the 2nd loan amount or anything else be taken into consideration? ie: can I have a back dated detailed realestate valuation completed or get a copy of any bank valuations done over this period?
    3: Would I be best to move back into the property to re set the 6 year rule, as would this only re set it at the 25% or the full 100%?

    For example would it be worked out like this?
    650k-370K=280k x 75% = 210k (x50% discount) = 105k

    Really appreciate any insight you can offer.

    Thanks so much, Manda
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    1. It was your main residence and you become absent so you could use the 6 year rule (assuming all other requirements met). But whether you could use it on the whole property or just the 25% is a good question.
    2. You should have got a value when first income-producing
    3. whether you should move back in or not will depend on what your plans are with the property.

    You need some relatively complex tax advice on this one.
     
  3. Manda123

    Manda123 New Member

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    Hi Terry, really appreciate your reply.

    Are you aware if I can pay a licensed valuer to complete a retrospective valuation of the property from that long ago or is this not possible? If it is would I need to do that for 2012 when rented out at 75% or only for 2014 when rented out at 100% and I officially moved out? or both? What kind of costs would i need to budget for this?

    Also yes its proving a complex issues and best I get sound advice, again what kind of budget range should I expect to pay for this and any suggested avenues to explore?

    Thanks again.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    yes valuers can make valuers as of a date in the past. more expensive though
     
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  5. Mike A

    Mike A Accountant Business Member

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    will only be able to extend the 25%

    "If you use any part of your home to produce income before you stop living in it, you can't apply the 'continuing main residence status after moving out' rule to that part. This means you can't get the main residence exemption for that part of the dwelling either before or after you stop living in it."

    Using your home to produce income
     
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  6. Manda123

    Manda123 New Member

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    Thanks Mike.

    So I can apply the 6 year rule but it will just reduce the CGT by 25%

    Are you able to clarify do I need 2 x valuations one in 2012 and again in 2014 or is it just taken from when I moved out in 2014 so thats the only valuation I need? This is where Im getting confused. Or if its taken from when I rented it out in 2012 as a portioned figure?
     
  7. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    s118-192 - A valuation is required at the date the property first produce rental income. Thats the ONLY time a val is used. Thereafter dates will be important to pro-rata.

    This matter isnt straight forward andit may assist to get tax advice and support to ensure you neither under or over pay tax. The renos for example will NOT count if they occurred prior to the first rent but will mean the value is based on the reno's having been completed at that time
     
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  8. Manda123

    Manda123 New Member

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    Thanks Paul, appreciate your feedback.