IP -> PPoR for sale purpose

One of my IPs has become vacant and I'm thinking about selling it. I'm currently living with a relative while my current PPoR is being renovated.

I'd like to move into my IP (that I'm about to sell) and call that my PPoR. My reason for doing this is to avoid paying CGT on the sale of the property.

So what does one have to do to make a property your PPoR? Update my licence? What else?

Is there anything else I need to consider, or have overlooked?

Appreciate everyone's help as always

 

You won’t avoid cgt. It would be subject to partial cgt on sale.

Would be based on the number of days it was your investment property over the ownership period.

To be your ppor would need to actually move into it. Nothing more. But won’t mean you won’t pay cgt.

 

Ok thanks, didn't realise that was the way it worked....

 

A property can only be exempt as a main residence after it is a main residence unless the new residence build rule applies. You cannot backdate or intend a property to be exempt

 

Forgive my ignorance, but once I move in, isn't it my main residence then?

 

From that point onwards perhaps.

Imagine that all you had to do to avoid paying CGT was to move into a property just before selling. No one would pay tax!

 

A property can be your main residence and still be subject to cgt

 

Yeah, I thought it would be too good to be true to work like that - hence my question

 

Consider strategies as well to potentially reduce the tax impact.

Maybe selling in a year when projected other taxable income is lower.

Maybe a deductible contribution to super ?

 

Not necessarily. Occupancy is a portion of the requirements under the main residence exemption.
Moving in briefly and intending to move back out is not a MAIN residence. We see heaps of mistaken assumptions about this and reno's. + Many other examples such as choosing another property as main residence or spouses with different main residences, dependent family who dont all reside in the property etc

This brings up a nasty in tax law that I often raise with newbs. s118-175 contains a special rule which can end or affect a main residence. It cant even be apportioned !!! Let assume Mum and Dad live in 25 Main Road and their two economically dependent kids move into Mum and Dads other property just nearby at No 29 Main Road. Only one of them is exempt and no apportioning is allowed. This is because dependants must also occupy the MAIN residence. This rule severs the exemption for No 29 as Mum and Dad dont also reside there. However same rule doesnt apply to spouses who can each SHARE a exemption.

The key words Main Residence have been subject of cases and the Commissioners own views.

Helps explains Mikes brevity with the view :

 

Agree with the above responses
I moved out of my ppor to renovate it, so bought a second property to live in.
After the renovation I left the step son to reside there and "we moved home", soon after the partner went and lived in the 2nd place with her son and it was sold inside of two years as part of separation
I had to pay CGT on one or the other.....
As you can't have more than 1 ppor, so CGT is applicable to one or the other
The ATO didn't care or want to hear that we were separated and living in each house, so I paid for the otber place, as the value increase after the ppor renovation was substantial....

 

separated spouses can have one main residence each. Hope you got advice on this.

 

15 years ago, and yes, but I now understand my "accountant" was a tick a box version, and no where near as experienced or dedicated as yourself @Terry_w
Just hoping the OP (and others) benefit from responses

 

However they cannot each have a exemption while they lived together for two properties that is 100% each. Separated spouses may have marital dissolution property settlement issues which further complicate CGT exemptions and costbase issues. Its definitely one for legal and independent tax advice BEFORE contemplating a sale.

I recently encountered one such case. The properties were still in both names. The court orders clearly instructed one of the parties to sell (with limited power of attorney for that purpose granted by the court) and to hold the funds from sale of three properties in trust with their solicitor and to pay the former spouse a specified percentage when all 3 sales had been completed at a price determined at public auction or not less than the average of three valuations/opinions. This is a very different CGT position from many orders which may call for a transfer of specific property to one of the parties who can then do as they please with what is then their property. These revised orders reflected the absolute refusal and unco-operative nature of one spouse to agree to sell martial property despite orders to do so. The court favoured the modified orders over contempt as contempt issues would not have addressed the key concern.

As tax agents we needed to seek the opinion of the client solicitor on the terms of the orders as if we acted alone in interpreting the orders it would have been (unqualified) legal services and not tax advice !