CGT question for vacant/non tenanted property

Hi All,

Would really appreciate any thoughts on below scenario:

I have paid for and built a house in NSW in 2013.Total spent on land and house $950K. The house is in my name.

July 2013 - once construction was completed me, my wife and my parents moved into this house.

Feb 2015 - Me and wife, in both names bought a unit in Sydney and moved there to live permanently. I would assume now it is our PPOR. I let my parents to live in the house, free of charge.

July 2017 - I am planning to sell a house with a profit. Say $1.2M.

My concern is CGT treatment of this event in July 2017. One tax agent that I have asked about this last year, said whenever I sell the house, i should pay CGT on the difference between selling price ( say $1.2M) and market valuation of the house as of Feb-2015. He said it is irrelevant that I am not renting this house and I did not earn a dollar of income from it.

Now the selling agent, who is obviously not qualified to give tax advice, saying I should not pay any CGT as I did not earn any income from it.

I am leaning towards, that unfortunately, I am liable to pay capital gain tax here.

Is there anything here worth wile investigating or tax agent was correct and there is nothing to speculate about?

Cheers

omg

 

Both are wrong. it could be CGT exempt for other reasons though, but this has further consequences.

Look at s118-185 ITAA 97 and s118-145

 

Did you claim interest payments as a loss against your income?

 

A range of factors involved

1. Why was it constructed ? Was there a profit making intent ?
2. Are you in the construction industry (TD 1992/135 could apply for these two issue ?)
3. If you didnt buy it to produce income and it was eligible for the main residence exemption then there may be a choice if you are eligible and decide to make that choice. It would mean where you lived after moving out may be taxed in the future for that same period. But since you arent selling that place (?) it can be deferred indefinitely until sold when a pro-rata would apply.

The issue of whether you earned rent isnt a factor for CGT. The issue is more about whether you are entitled to use the main residence exemption and want to make that choice.

Get personal tax advice . The CGT could be $0

 

1. I have used a builder to build it for my family to live there. It was supposed to be long-term home for my family, but due to new work arrangements I had to move from that house. Parents decided to move to a different location too. I dont want to rent it out, so decided to sell.
2. I am not in construction industry and have nothing to do with construction.
3. I see. I will be engaging another tax agent to go through my options if any.

Thanks a lot.

omg

 

T

Thank you Terry_w.

Though quick look at s118-185ITAA 97 shows that tax agent was correct?

I understand selling agent gave poor advice, but whats wrong with tax agent's?

Cheers

omg

 

You can claim one property only as an exempt ppor even if you weren't living there but the other property would become assessable for that same period. So you need to decide which one would have the larger tax liability attached.

 

And typically you will only know ONE of the tax costs and the other will be a projection. IMO its always better to take the available concession today. But in some instances (eg sale that is close to break even or a tiny profit) it may in fact be better to elect the other.