Exit strategies.

What are some exit strategies to consider?

If the government doesn't change cgt laws 20 years in the future, does anyone plan to live in an IP for 6 months prior to sale to avoid cgt altogether?

 

Moving into an IP for 6 months after you have owned it for 20 year will not do a great deal to reduce your CGT liability.

 

I hate moving. That sounds awful.

 

How is cgt calculated on sale of you've lived in a property?I thought if it was your ppor within the last 6 years then you avoid cgt?

 

No, not a chance.

There is a 6 year rule but it does not work in the scenario you have described.

 

You have to pay CGT on the capital gains made while it was an investment.

If it is your PPOR and you move out and it becomes an IP, then you can still treat that one property as your PPOR for the next 6 years and avoid CGT. You can't move in at the end and get the past 6 years of gains tax free.

 

Ahh I understand now. Doesn't sound so lucrative now but still something that should be factored in when planning a strategy.

Thanks!

 

It would be based on a % of the time you lived in it. So perhaps 4% of the cg will be exempt

 

I found this CGT calculator to be fairly accurate. Use it with a grain of salt.

https://www.ato.gov.au/Calculators-and-tools/Capital-gains-tax-discount-for-individuals-calculator/

 

Just wait for the bubble to burst then leave with nothing

So say the doomsayers.

 

What if you have lots of IPs, not really sure what you would be saving? what if all the IPs are in areas that you dislike/don't suit for whatever reason?

Am not interested whatsoever in this sort of strategy, I don't see the point as lifestyle is far more important to me.

 

Most people I talk to don't really know their exit strategy, me included.

I'm in the acquire phase but not sure what to do once I've acquired enough. I'd like to buy a place in a nice area that potentially has a lot of growth, but I want to live in many cities over the next three decades so renting may be more suitable for my lifestyle.

I am getting the grips on buying in growing markets, I don't know how, when or why I will need to sell.

 

Me too - I'd like to own a few properties in each capital city. The lifestyle between cities is something I want to experience, which is why a lifestyle of moving around would work well for me but may not suit everyone.

In saying that, I was under the wrong assumption of huge CGT savings if you live in a property for 6+ months, you're CGT exempt for up to 6 years afterwards, as long as you don't make another property your PPOR. Now that I know, it's not really attractive unless I want to get rid of a house that's in an area I want to stay and make up some minor tax savings.

 

What if somebody had multiple IPs. Sold them. Recklessly spent all the profit and then couldn't afford to pay the CGT.

Then they went into some kind of taxation exile so that the bankruptcy trustee couldn't find them. Or in fact debt collection proceedings couldn't even be started against them because no notices could be served.

There are probably people out there in this scenerio.

Or, maybe they could, I don't know, apply for some kind of taxation relief under, say, Section 265(a) of the Tax Act. Maybe they could convince a Relief Board of hardship or something and not pay any tax.

 

Yes many.
After being discharged from Bankruptcy they could no longer come after you for the prior tax debts.

 

Hi, I have been investing for about 20 years now and am planning to call it quits and retire from mainstream work at either 55 or 60.

I'm married, two kids in my late 40's. We have over $7M in property with an LVR of around 50%.

Exit plan is to sell down half the portfolio when I am 55 and invest this in a fund (I'm assuming 5% return), whilst continuing work until 60. Based on initial calculations including CGT, exit costs etc this will provide around $1.8M which should grow to $2.4M at 5% compound growth for 5 years.

At 60, sell down the remainder of the portfolio and then use proceeds to purchase our PPOR (at this stage we are renting). This will contribute another $4M or so after CGT, exit costs etc.

So, with around $6.4M, the plan is to purchase a home for $2-2.5M and then invest the remaining $3.5M at a minimum of 5% which I believe is achievable.

We'll also have around $1M in Super as well to augment this.

So, approximately $175k return on the $3.5M invested plus any extra from Super in todays money.

I have not taken into account any additional investment funds or contributions over the next 11 years which should add more to the pool.

Please note that this is based on preliminary calculations, and am in the process of getting all of this validated with my Accountant and Financial Planner.