New ppr rent out and land tax??

Discussion in 'Accounting & Tax' started by Daves2074, 22nd Aug, 2017.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Daves2074

    Daves2074 Active Member

    Joined:
    18th Jun, 2015
    Posts:
    34
    Location:
    Sydney
    we are;
    Selling current ppr (in nsw)
    Have purchased new ppr (in nsw)
    And intending to rent our new ppr for 6 months while we draw up plans for new build on this new ppr.
    Are we exempt from land tax on the above??
    Thx
     
    Daves2074, 22nd Aug, 2017
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,983
    Location:
    Australia wide
    Depends.
     
    Terry_w, 22nd Aug, 2017
    #2
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,523
    Location:
    Sydney
    Very much so.........

    I note that a property you buy and dont live in isnt actually a residence ("PPR") at all. Its an investment property. Merely an intended home but the drawing up new plans could impact that too. CGT may also apply to your former home for part of its time. And the new one......Its essential that non-deductible ownership cost records are retained in this case as one day the pro-rata CGT calc can be reduced further !!

    You should consider if the 6 month overlap rule allowing you to sell the former home WITHIN 6 months could be used and if it has any value.

    The NSW land tax revenue ruling explains all the conditions.

    Revenue Ruling No. LT 082 Version 5 | Revenue NSW

    Probably clauses 6 and 7....6 is clear about unoccupied. 7 is very tight on dates.
     
    Paul@PAS, 23rd Aug, 2017
    #3
  4. Daves2074

    Daves2074 Active Member

    Joined:
    18th Jun, 2015
    Posts:
    34
    Location:
    Sydney
    Thanks Paul!
    Not sure if I have explained correctly. Settlement of both properties will be simultaneous (or close to).
    New purchase isn't suitable for us to live in, but is rentable. We would look to rent elsewhere ourselves and rent out our new house while plans are drawn up - at a guess 6 months renting out new house prior to knock down and rebuild.
     
    Daves2074, 23rd Aug, 2017
    #4
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,983
    Location:
    Australia wide
    It could be exempt depending on a lot.
     
    Terry_w, 23rd Aug, 2017
    #5
  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,523
    Location:
    Sydney
    Personal advice would be an idea
     
    Paul@PAS, 23rd Aug, 2017
    #6
  7. Daves2074

    Daves2074 Active Member

    Joined:
    18th Jun, 2015
    Posts:
    34
    Location:
    Sydney
    Thanks guys
     
    Daves2074, 24th Aug, 2017
    #7
  8. Bonz

    Bonz Well-Known Member

    Joined:
    23rd Oct, 2015
    Posts:
    144
    Location:
    Fremantle

    Not sure of the situation in your State. In WA you can own a second property for the purpose of building your PPR and avail yourself of a two year exemption from land tax on your second property whilst you are building your new home.

    However if you rent the second property for any period prior to building your new home, you lose the exemption. A person I know rented his second property out for 6 months for $12k whilst doing the planning for his new home on the second property. He missed out on the exemption and picked up a land tax bill for $75k.

    I would seek professional advice as the consequence of getting it wrong can be significant.
     
    Bonz, 24th Aug, 2017
    #8
    Paul@PAS likes this.