Moving out of PPOR - how to calculate eventual CGT payable ?

I just did a matter where relying on a delay in moving in to a property saved the client $50k in tax. Applying s118-185 resulted in $50k less tax than the s118-192 mistakenly relied upon by their accountant.

 

I agree - Many assume it is automatic but exceptions should be explored. In some cases its important to consider loads of little details. A list of examples under the heading Find out how the main residence exemption applies when you....or is 2HA+

The ATO even mention on their own website that choosing to delay moving in (after recovery from illness) means the main residence test isnt met - Due to the delay caused by choice NOT the illness. However, in the example of Li Jing an unforeseen event like a work trip wont count and would mean the main residence test is met despite overseas travel.

Moving in

A choice of deferring moving in to go away for a weekend may be sufficient. However being unable to move in due to no vans being available because you forgot to book one may not be sufficient.

 

That Li Jing example is a bit hairy. I think the ATO have got that one wrong.

 

Really depends. If she was instructed by her employer to go overseas and had no choice in doing so and then when she returned she moved into the property the provisions would apply. Refer to Couch & Anor V FCT.

The Explanatory Memorandum to Tax Law Improvement Bill (no 1) 1998 says

"
The rewritten provision takes account of situations where, for example, there is a delay in moving in because of illness or other reasonable cause.

The exemption does not extend to cases where an individual is unable to move into the dwelling because it is being rented out. However, it would cover a period after the end of the tenancy if the owner could not take up residence immediately because of the nature of repairs required to the dwelling."

i think Li Jing does fit into the category of "other reasonable cause"

 

after having just assisted a client with an audit on this issue (thankfully they ATO said all was ok) it highlighted the extreme importance of keeping records.

In this case the property was only moved into for a few months. ATO wants proof it was lived in. Electricity records they say might be ok. License registration at the property better. Motor Vehicle insurance showing the car was garaged at that property great. BUT if you havent kept those records going back 3 years later can be very difficult.