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how to avoid CGT on 2nd PPOR

Discussion in 'Accounting & Tax' started by fairy, 8th Nov, 2015.

  1. fairy

    fairy Active Member

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    I am currently living in my PPOR. Looking at getting another land to build as my PPOR. Once new one built completed i will be selling my current PPOR. What would the tax implication ?
     
  2. Greyghost

    Greyghost Well-Known Member

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    Second one cannot be PPR until it is built and able to be lived in.
    At that point you would make an "election" for the new prop to be your PPR.
    Then you have the 6 month overlap rule (where you are able to have 2 PPR's and incur no cgt). After that point you should have a valuation on the old PPR, as any cg after that point will incur cgt.

    So long story short. No tax implications as you are going to one PPR from another.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The new one can be the main residence since the date the land was purchased, up to 4 years prior to living in it. But you cannot have 2 main residences at the same time - except for the 6 month rule - this won't apply unless the first one is sold within 6 months of acquiring the second.

    So I think there would be some tax implications if the whole thing takes more than 6 months.
     
  4. fairy

    fairy Active Member

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    Thanks.
    Once i buy the 2nd PPOR, the built process could take up to 18 months. Once new one is ready i will move to the new property and sell the existing PPOR. I have no plan to rent out the new property while i would be going through design and approval process. I was looking at going for a old house and do knock down re built.
     
  5. melbournian

    melbournian Well-Known Member

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    18 months is a pretty long build - are you building it yourself or you building apartments?
    Any build including getting plans, occupancy etc should not exceed 9 months for standard build. Otherwise it would just cost more in terms of interest etc.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Capital growth on the existing house should be pretty minimal over 18 months and there will probably be no CGT payable even if the exemption doesn't cover it.
     
  7. fairy

    fairy Active Member

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    Terry,
    Thanks. While i would be going through knockdown rebuilt i will be leaving in my existing PPOR. While i am living in my current PPOR should i get valuation done for PPOR. I have calculated 18 month for worse case scenario.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Good question. I am not sure of the answer because s118-192 applies where a property is used to first produce income and your old one won't be producing income.

    If you choose to make the new property your main residence under s118-150 then the old residence cannot count for any overlapping period - except the 6 month rule.
     
  9. fairy

    fairy Active Member

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    Thanks Terry,
    My current PPOR is on my name. Can i put the new one on my wife name. My wife doesn't have any PPOR on her name.
     
  10. Scott No Mates

    Scott No Mates Well-Known Member

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    You can only have one ppor. You must divorce the wife, live apart to each have a ppor. (This works well for a family friend where one parent lives on oz the other OS for six months and has a separate property from her ex- partner). When in OZ she comes over each morning and spends the day.
     
  11. melbournian

    melbournian Well-Known Member

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    nah - as scott mentioned you need to be divorced. Wonder why you are worried on the PPOR, as the price would not have significantly increased after you have moved out.

    I would just get a valuation of your PPOR when it ceases to be your PPOR so it is the based value (get a few agents to get some high valuations in). and then move into the your new PPOR , so then onwards it is at least CGT free for that price. if it moves another 20-30K then so be it. if buying wife's name unless in cash, loans serviceablity etc all starts to play into it.

    i have experience in selling 4 PPOR in 1.5 years moving from one to the other, which is CGT free.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You can, or she can. But consider the implications before doing this. spouses get one main residence exemption between them,
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The section you are thinking of actually says you can reset the valuation at the value the property first becomes income producing. The ex-main residence won't be income producing.
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I don't think divorce is needed, as long as the couple are genuinely separated.
     
  15. melbournian

    melbournian Well-Known Member

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    interesting, that means holding two empty non-income Ip or (land + soon to be Ip):)