Join Australia's most dynamic and respected property investment community

CGT question

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

  1. barnes

    barnes Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    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 Tax and Structuring Lawyer Business Member

    Joined:
    18th Jun, 2015
    Posts:
    11,780
    Location:
    Southern Highlands NSW
    Xenia likes this.
  3. barnes

    barnes Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    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 Tax and Structuring Lawyer Business Member

    Joined:
    18th Jun, 2015
    Posts:
    11,780
    Location:
    Southern Highlands NSW
    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

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    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

    Joined:
    20th Jun, 2015
    Posts:
    85
    Location:
    Regional NSW
    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

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    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

    Joined:
    13th Jun, 2015
    Posts:
    3,784
    Location:
    Perth
    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 Tax and Structuring Lawyer Business Member

    Joined:
    18th Jun, 2015
    Posts:
    11,780
    Location:
    Southern Highlands NSW
    Wrong.
     
  10. Westminster

    Westminster Tigress at Tiger Developments Business Member

    Joined:
    13th Jun, 2015
    Posts:
    3,784
    Location:
    Perth
  11. barnes

    barnes Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    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. 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

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    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. barnes

    barnes Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    Thanks Paul, I thought something new came out, but it seems to be - nothing new. Thanks anyway.
     
  15. Pistonbroke

    Pistonbroke Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    395
    Location:
    Guangzhou
    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.
     
  16. Terry_w

    Terry_w Tax and Structuring Lawyer Business Member

    Joined:
    18th Jun, 2015
    Posts:
    11,780
    Location:
    Southern Highlands NSW
    In Australia the deposit will generally be held on trust until settlement. In many other countries the developer can run off with the deposit...
     
  17. barnes

    barnes Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    674
    Location:
    Adelaide
    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%.