Estimate capital gains tax

Hi there
Would love someone to look over the following scenario and tell me if I’ve got it right.
I recently sold a property and called my accountant to see how much capital gains tax I will be paying. It was a confusing call, but after reading some posts on here, I think I’ve got it worked out. Here’s the situation:

Purchased ppor A in 2000 for $160k.
Lived in it for ten years, then moved out and rented it out in 2010, (estimated market value in 2010 is around $320k.)

Purchased investment property B in 2010, lived in it for 4 years then purchased my new ppor C in 2016. I sold my first property A in April this year for $536k.

My capital gain therefore is about $200k (after taking away agent cost etc).
As my new ppor C didn’t increase in value for a few years, I am thinking property A will be the ppor for tax purposes until 2016 (using the 6 year rule). So this means 4 years out of the 10 it was rented, it was not my ppor, which means my capital gains tax is $80k. 50% discount applied, means it is $40k and added to my $30k income for the year, gives me a taxable income of $70k, which works out to be about $15,700 tax to pay? Does this sound right?
If so, the financial advisor I just saw told me to put $25k extra in super for this year and also $25k for previous year to reduce the tax. Do I need to put this much in? Or just $16k to reduce the tax to zero? I was hoping to use the money to renovate rather than put it in super.
Thanks to anyone who responds!

 

I'd double check on this, but I'm sure you can only claim the 6 year rule if you actually move back into the PPOR.

 

I don't think you need to move back in

 

*not an accountant / advice*

But you can't just cherry pick a random property you have lived in the past and still own as your PPOR for specific years.

Property A was your PPOR until 2010.
Property B was your PPOR for the 4 years you lived in it.
Property C is your PPOR while you live in it.

The 6 year rule applies where you don't have any other main residence AFAIK, so it wouldn't apply in your situation.

Treating a dwelling as your main residence after you move out

I don't think you have to move back in, but you can't have another PPOR and still claim it.

 

The 6 year rule can apply to your main residence whether you move back in or not. But it cant apply to 2 properties at the same time.

 

As I lived them in all initially, my understanding is I think you can choose which is the main residence in the year you sell something. I want to choose property A as ppor until 2016 and property C from 2016 onwards. Property B will not be a ppor for tax purposes, even though I lived in it for a while.
I obviously need an accountant to clarify (this is not my forte...) - just trying to get an understanding before I see him so I have some idea what’s going on. Thanks.

 

You can choose which property to count the exemption on in the year of sale of the first of them.
But you cannot choose both for any overlapping period.

See the law
www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.145.html

 

So by "treat" it only means for tax purposes, rather than the act of living in another main residence?
I can buy and live in a different property for 4 years, but "treat" a prior PPOR as my main residence for tax purposes?

 

yes you can have another main residence - but can't treat both as exempt for cgt

 

Very interesting. Thanks. Looks like your understanding was right @onthebus, my apologies

 

Calculation of a CGT tax amount is a tax agent service and best addressed as personal tax advice rather than a forum post. As Terry identified the main residence choices and even third element costs (in the calc or another property perhaps?) potentially could vastly alter a CGT amount now or even later. Its possible there is a choice and with advice you will understandand the implications of making that choice.

 

Not for the same days usually but both could be exempt at different dates. Take care with choosing one as exempt without knowing the tax impact on another.

 

Thanks for the responses. Unfortunately my accountant is on leave now and the soonest I can get an appointment is Monday afternoon, 22nd June, which may be too late to deposit however much money he suggests into my super and get the notice of intent done by June 30? (Assuming both have to be finalised before June 30?) And I would imagine far too late to organise prepaying interest for 12 months as a tax deduction if I started the ball rolling today?

 

Accountants would need to hold financial services licences to suggest you contribute to super - does your one?


Too late to prepay interest probably. You can ask your lender though.

 

Ah - that makes sense. The accountant referred me to a colleague, who is a financial planner to talk about super - so I guess he doesn’t. The financial planner wouldn’t discuss my tax at all - said he wasn’t allowed. So I can see now I needed to get a clear idea on my cgt amount before seeing the financial planner, which the accountant seemed reluctant to do over the phone - too many variables I guess. Oh and all so late in the day to try and minimise tax ... !! Think I’ll call the super fund and see if Monday is too late to deposit the funds in. Thanks for the help.

 

22 June is plenty of time. Bpay takes overnight.
The notice of intention to claim can be made later as long as its prior to 1. A pension, 2 Lodgement and 3. 30 June 2021