Join Australia's most dynamic and respected property investment community

how many of your IPs have you lived in?

Discussion in 'Accounting & Tax' started by ellejay, 13th Jun, 2016.

  1. ellejay

    ellejay Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,135
    Location:
    Kimberley and NZ
    Has anyone lived in a number of their ips to claim tax advantages? How many times can you potentially do this with different ips? What's the difference in taxation terms between moving in straight from purchase then moving out and renting out the ip as opposed to moving in during the first 6 yrs for x period of time and then renting it out again? We're considering moving in to an ip we're currently purchasing but have a few others that have all had nice capital gains. Basically I'm trying to work out the most tax efficient way of selling these over the next 20 or so years.
     
  2. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,527
    Location:
    Perth, Melbourne, USA
    Just throwing it out there, if you sell after giving up the day job/reducing income/salary this may be the best way to go. However may not be at all practical.
     
  3. ellejay

    ellejay Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,135
    Location:
    Kimberley and NZ
    Hi, I'm finishing up work in December at the latest so would be selling them gradually to fund retirement.
     
    MTR likes this.
  4. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    Joined:
    14th Jun, 2015
    Posts:
    2,125
    Location:
    Sydney & Adelaide
    Have turned 2 x PPOR's into IP's. Never lived in one that I have bought as an IP first.
     
  5. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,527
    Location:
    Perth, Melbourne, USA
    I am going to have to pay CGT this financial year, however I don't have to pay my tax till the following year in May 2017, its nice to have more time up your sleeve. If you can do the same it does help with cash flow.
     
    Last edited: 13th Jun, 2016
    ellejay likes this.
  6. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    939
    Location:
    Qld
    Since you can only claim one PPOR exemption at a time (including 6 year absence) it is hard to see much advantage flitting from one IP to another.
    Marg
     
    Tranquilo likes this.
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,045
    Location:
    Sydney
    There could be.

    Imagine you own 3 IPs and had lived in eqch of them just after purchasing. When selling any that property could be cgt free.

    Also it may be possible to choose the property with the most capital gain as the main residence even though you may be selling another.

    This choice only has to be made at the sale of the first of the 3.
     
    Ed Barton, WattleIdo and MTR like this.
  8. ellejay

    ellejay Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,135
    Location:
    Kimberley and NZ
    Thanks Terry. I wonder if this still works if you move overseas, move into an ip as ppor but whilst still tax resident in Aus?!, Could be fun, but could there also be tax advantages?
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,045
    Location:
    Sydney
    Yes. Works while overseas.
     
    ellejay likes this.
  10. Bran

    Bran Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    3,229
    Location:
    At work
    I've kept two 'PPORs' as IPs, and our current PPOR is still an IP in the bigger picture. There is an opportunity to modify it into a long-term home, but even tonight we discussed that we would simply buy a completed version and keep this one.
     
    ellejay likes this.
  11. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,527
    Location:
    Perth, Melbourne, USA
    so Bran what are the advantages of doing this?
     
  12. ellejay

    ellejay Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,135
    Location:
    Kimberley and NZ
    Terry just called it I think. You could pay 0% cgt on the one that makes the highest capital gain.
     
  13. Bran

    Bran Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    3,229
    Location:
    At work
    No planned advantage, I've bought houses when I've needed them and kept them. Mostly I've been required to move, and not wished to move back in. The first was a dud (LMR, so may one day come good), the second was lucky (also LMR, good developable block), the third is a 'blue chip' stepping stone. The fourth was the first time i've bought something strictly as an IP. I suspect the next few will also be (unless the right next 5-10 year PPOR comes up).
     
  14. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,527
    Location:
    Perth, Melbourne, USA
    I am pretty sure this is exactly was Jan and Ian Somers did, school teachers relocated regularly and collected primary homes which became IPs
     
    HUGH72 likes this.
  15. ellejay

    ellejay Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,135
    Location:
    Kimberley and NZ
    If I was you I'd be planning a temporary move to my ppor in US ;)
     
    MTR likes this.
  16. Bran

    Bran Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    3,229
    Location:
    At work
    Is that so? It hasn't paid off yet, but it has allowed us to make minor cosmetic improvements, sit for a bit, play in the garden, and collect the next house deposit.

    Actually... when i say it hasn't paid off, I'm pretty sure I've only ever paid cash for my first deposit = 2.8% of the portfolios value. Still on a fairly high LVR though
     
    MTR likes this.
  17. Ed Barton

    Ed Barton Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,129
    Location:
    Brisbane
  18. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,400
    Location:
    Sydney
    Normally when a persons ceases to be an Australian tax resident they lose the 50% CGT discount. However when a property is CGT exempt the discount concession isnt relevant. Exemption prevails. What this means is that the person may leave their former home and retain use of the 6 year absence rule so that the first 6 years are tax free.
     
    ellejay likes this.
  19. ellejay

    ellejay Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,135
    Location:
    Kimberley and NZ
    That's really interesting. So, if I had a property that is CGT exempt because I'd lived in it from day one (ppor) and one in an smsf then neither of these would trigger a CGT payment?