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Confusion on CGT

Discussion in 'Accounting & Tax' started by Cherrychan, 4th Aug, 2015.

  1. Cherrychan

    Cherrychan Member

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    I currently own one property and reside in it as my PPOR. I'm likely to put it on the market within 6 to 8 months.

    I'm currently looking at purchasing a second property. I will rent it out for 6 months or so until my first property is sold and then move into my second property once the lease expires.

    If I renovate and then put the second house on the market within a year of living there, will I be liable for any CGT having rented it out? Is there any rule such has you have to reside in your PPOR for a year etc for it to not be liable for CGT?

    Thanks
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes you will be liable.
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The main residence exemption only starts when you reside in the premises. However there is a 6 month overlap rule which you may think about.

    It allows you to own a MR and move into a new MR and provided you sell the first MR within 6 months then the MRE applies to both. But the 6 months is strict. You need to be absolutely sure it has gone to contract within that time.

    This wont address the issue of the new MRE being taxable for its initial 6 months (when it sells) but should guide a strategy that avoids the problem
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    There is also a three month rule for new constructions. If you contract to build, move in and later sell and haven't lived there for at least three months the MRE doesn't apply.
     
  5. Cherrychan

    Cherrychan Member

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    Thanks. I think I understand it now.
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Buying a tenanted property is a CGT trap. A issue to negotiate with price ?
     
  7. Cherrychan

    Cherrychan Member

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    It's currently empty. I'd move in, renovate, then sell. Except I've got maybe 2 or 3 months left until my current reno is finished, then probably 2 to 3 months until the property sells. So I may be jumping the gun a little. CGT is annoying...
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Then its likely that tax law says its not a capital gain eligible for any exemption. You didnt ask for tax advice before starting ? Rather silly.