CGT payable

Hi,


I have a question about CGT payable in our situation. In late 2015 we decided to turn our PPOR into an investment property and move into a different PPOR. In order to free up some equity, the loan/title structure changed on our existing PPOR by my wife ‘selling’ me her half of the property. The loan and title came into my name only and we used the equity as a deposit on our new house.


The loan we took out was for $350,000, but the house itself was valued at $460,000 at the time. I understand there is a 6 year rule around this, but just as a general question, would I be paying CGT on the valuation of $460k or the loan value at the time of $350k?


Regards,

 

Its usually the value of the property at time of transfer that will determine any taxes. The accountants on the forum will no doubt chime in soon.

 

If you claim the 6 year exemption for this property, you cannot also claim your "other PPOR" as cgt exempt for the same period.
Marg

 

The spouse sale will mean 50% of the main residence exemption ends on the date she sold to you. There would be a new costbase for that 50% based on its market value at that time. The other 50% you originally owned would be subject to its original costbase and likely be exempt under the main residence exemption absence rule for no greater than 6 years.

BUT the 50% your wife sold you cannot be exempt since its not eligible if its was transferred to you after you ceased to reside there. It wasnt a interest you owned when you were resident and so the absence rule wont apply. You cannot be absent from a interest you didnt own and occupy at that time. You would have needed to reoccupy the premises and then become absent again.

I believe you can choose 50% as exempt on this one and 50% of the other property but not 100% for the former home.

If the property had been transferred to your name the day prior to ceasing occupancy I believe it could have been 100% exempt as a former residence if you and your spouse agreed to make it the exempt residence. It is not a requirement that the residents be owners. This occurs with new partners who may have each owned a home. They cant each claim the absence rule. It is a requirement only that for the absence rule that the owner must have been a resident for that interest and still holds a ownership interest. The italics is the fatal part in the issue I believe.

s118-185 applies to pro-rata any exemption as a consequence

 

I will reply before reading Pauls to see if we get the same response.

You have 2 interests in the property.
a) your first 50%. This could be claimed as the main residence and could be CGT exempt. Or you could be deemed to have acquired this share at the market value at the date you moved out.

b) your 2nd 50% acquired from your wife. This was acquired at the point of moving out so the main residence exemption would probably not apply to this. The cost base for this would be the market value at the date it was transferred.

 

OK you mentioned s118-192 as a "could be"...I didnt want to complicate that one. I will now....

The costbase of parcel (a) is reset by s118-192 from 50% x historical cost to 50% of market value when it is first used to produce income BUT if you sell within 6 years thats fully exempt so its disregarded. After 6 years a pro-rata calc applies so the new costbase MUST be used.