Interesting Legal Debacle

This is not me, but someone I know, I found it very interesting what might happen

TLDR version
PPOR
They relocate overseas
Rent it out for 5-6 years, apparently there is a rule for CGT exemption or reduction that ceases if you rent it out for more than 5-6 years (someone can confirm)
they give the keys to a friend to manage (not sure if its via a PM or not) to rent out etc.

when the 5-6 yr period was over, their instructions was to leave it vacant,
however dodgy friend either went through a PM and rented it out, or Airbnbed it or privately rented it out and kept all teh cash


Would the owners CGT exemption be void, as the house was rented out, but not with their permission, and they didnt get a cent

owners only found out about this by accident from googlemaps when they saw a unidentiied car in the drive way

 

What you don't know doesn't hurt you?

That being said... The new rules mean no CGT relief for non residents with some limited grandfathering until 30 June 2019 for property held prior to mid 2017.

 

I thought the new rules only apply if you sell when you are nonres.

 

You might be right there.

 

2 issues
can only claim as main residence for a max of 6 years if rented, no limit if unrented.
main residence exemption not available to non-residents for tax (including citizens) if the new law passes.

 

3rd issue - 50% CGT discount being removed too for non-residents.

 

Ok so if they rent it out for 6 yrs and then leave it unrented. Then no cgt

Ehat happens if the 7th year its rogue rented?

Records would easily show its been rented if its on re.com

 

sounds like they have leased it to their mate.

 

Not quite.

 

....to a friend to manage... not exactly a complex issue. And preciselky why non residents will lose all past cgt concessions.

 

Was removed in 2012

 

Ok hypothetically
Lets replace friend. With dodgy or incompetent professional agent.
If an income was generated but it didnt go to the ownee or was against owners instructions.
Would the owners get penalised for something they didnt ask for or get benefit

 

Why wouldn't the owners have noticed they weren't getting paid and followed up - whether due to friend or property manager?

5-6 years seems too long for them not to have known.

 

No no. Sorry if i was unclear

My friends have moved back overseas (i dont know if they are still residents here or not)

They knew the 6 yr rule and rented it out for 6 yrs. (Via an agent or privately i do not know)

Once the 6 yrs was up. They gave the kids to a friend to keep an eye on as they were going to leave it vacsnt.
However this friend was naughty and rented it out and pocketed the money.

If the ato did an audit they would lose the 6yr cgt concession as it was rented out for more than 6 yrs. Howvee the owner didnt kniw about it. Nor did they see any of the funds.

What would happen from a legal perspective here

 

wAS the property income producing?

 

Well yes i guess so. But what is income defined as?
Producing money AND going to the owner?
Producing money period?
What happens if it was done against the owners willl?

 

Is the 'managing' friend claiming the rent, lodging the bond, paying the utilities/rates, insurance etc?

Could be construed as the owners are still leasing the premises for a peppercorn in return for the friend doing all the hard lifting.

Just because they aren't seen to be receiving the rent doesn't mean they don't know about what's going on.

 

I have no idea.
My friends had absolutlelt had no idea it was rented out.
They only got suspicous when they Google mapsed their housr and saw a car in the drive away

 

@TMNT - you're getting less than half of the story by the sounds of it.

The owner is now aware the property is leased. If it continues car too much longer, the friend might even put in a claim for adverse possession as the owner's have abandoned the property.

 

Maybe they are overestimating the power of names,because someone's name or account would be paying all the outgoing bills,plus you can blame everyone before you sign as your Accountant passes your yearly tax statements across the table to check and sign after that you carry the can..