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CGT question

Discussion in 'Accounting & Tax' started by barnes, 24th Jul, 2015.

  1. barnes

    barnes Well-Known Member

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    A Capital Gain Tax question

    I have a chance to purchase an apartment overseas OF THE PLAN. I’m paying a full price now, but the complex where this apartment will be, is going to be built in 4 years. In 4 years time I will receive the title (there is no separate title for the land) and I intend to use this place as my PPOR for some years and live there.

    In the meantime I’m living back home in OZ in my PPOR.

    In 4 years time, after the apartment is completed I will sell my PPOR here and move overseas for some years.

    QUESTION:

    How can ATO qualify this apartment in case I want to sell it in 8 years time (4 of which it was built and other 4 I had lived in it as a PPOR) in case it will increase in value? I’m not planning to rent it out, I only intend to live in it.

    I’m mostly interested in their qualification of the BUILDING PERIOD (which is 4 years) before I will move in.

    I understand that I cannot have 2 PPORs at the same time (or can I in some special circumstances?).

    Thanks for your help.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Xenia likes this.
  3. barnes

    barnes Well-Known Member

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    Thank you Terry_w
    So it means that ATO qualifies something which isn't built as a dwelling which belongs to me, even though I don't have a title of ownership of it and cannot live in it (because it doesn't exist?) And is subject to capital gain tax if I will sell it in the future (the building stage)?
    Where is common sense here?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Prefect common sense. You mean to say if you sold it for a profit before titles are issued there should be no tax.

    You have a 4 year opportunity.
     
  5. barnes

    barnes Well-Known Member

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    So, the only way to go is not to declare my existing PPOR as a PPOR, but qualify a nonexistent apartment a PPOR instead, from the 1 day?

    Thanks again.
     
  6. jrc

    jrc Well-Known Member

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    When you move overseas you might become a non- resident. You need good written advice not rely on giving just part of your circumstances on a forum
     
  7. barnes

    barnes Well-Known Member

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    My family will stay here, some business will also be conducted on OZ soil, so I will not become a non-resident. I will, of course, talk to professionals before making any purchases or moving anywhere. Thanks.
     
  8. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Technically when you leave here even if you remain a resident your OS address will not be consider a PPOR for tax purposes I believe.
    I'm grey on this area but I think the OS property is subject to local tax and not Australian CGT etc and you could potentially have a PPOR in Australia still
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Wrong.
     
  10. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Well there you go, I trust @Terry_w way more than my dodgyness
     
  11. barnes

    barnes Well-Known Member

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    So it means that ATO will look at capital gains from overseas property the same as it does about property in Australia?
    And another question. Let's say I have 2 properties: one in Australia, one overseas. I live in both properties, 5 months in one, 7 months in the other, than move back to Australia again, then go overseas again and so on. And will be doing it for several years. Which property can I call my PPOR when I sell it, or I can calculate the exact time I live in each one and deduct this time from my capital gain? I will not rent out any of them ever.

    Thank you for your answers.
     
  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    You may become a non-resident for tax purposes. This question is more about where am I a permanent resident ...this may be the starting point.

    Some taxpayers can choose which property is subject to a MRE where the absence rule applies to one or both properties.
     
  13. barnes

    barnes Well-Known Member

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    Thanks Paul. I don't think that it might happen. I have strong ties to OZ and have some business activity here.
    What is an absence rule and where can I read about it?
    Thank you all for your help.
     
  14. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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  15. barnes

    barnes Well-Known Member

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    Thanks Paul, I thought something new came out, but it seems to be - nothing new. Thanks anyway.
     
  16. Pistonbroke

    Pistonbroke Well-Known Member

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    Doesn't risk come into the equation here? What protections are in place for paying 100% of a non-titled unbuilt property which is to be delivered 4 years hence (if you're lucky)? In Oz you can only be required to stump up 10% which can be a deposit bond.
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    In Australia the deposit will generally be held on trust until settlement. In many other countries the developer can run off with the deposit...
     
  18. barnes

    barnes Well-Known Member

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    Yeah it's possible and it happened before (not to me though). In this case I'm fully insured. I wouldn't even consider this idea if I wasn't covered for a 100%.