PPOR 6 year rule and buy IP

Great advice, @Paul@PFI. Thank you for your suggestion.

So to sum up:

1. You have a 6-year provision to sell this IP without incurring any CGT if you sell within this timeframe.
2. If you rent it for more than 6 years and then you sell it (without ever moving in into this property again), the base price starts when the PPOR was turned into IP, not the year where your 6-year rule expires.
3. You can deduct all associated holding cost and expenses for CGT purposes from the year you rent it out to the year you sell the IP.

How am I going so far?

 

If you have rented the property during the six year period you would have been able to claim the holding costs e.g interest, council rates as a deduction so they wouldnt be added to the cost base.

 

Thanks for the clarification.

Given the above situation. Understood the base price for the purpose of calculating CGT is as of 2013 market value.
Suppose the market value as of 2013 was 600k, selling in 2020 for 800k, for simplicity 10k depreciation claimed every year. so the capital gained 800k - (600k - (7x10k)) = 270k.

Are we paying CGT based on (before 50% discount):
a. 270k? or
b. 1/7 * 270k? (as I understand the first 6 year CGT exempted, only pay the 7th year)

or if none of the above?

 

Gain gets halved on then added to other taxable income so the answer would be c - none of the above. It would be roughly $135k taxable gain.

 

Thanks @Terry_w
i was kinda hoping the answer was b plus 50% CGT disc

 

Hello everyone, I am new here but used to read a bit on Somersoft forum.

I purchased my first IP(a) back in 2002 (170K) then moved in as PPOR from 2009 until 2012, then left again and rented it out, turning it back into an IP. I did not get a valuation at this point.

I then rented myself, and whilst renting bought another IP(b) in 2014, which I want to move into now as my PPOR, renovate and stay there for several years.

IP(a) is in Cairns, and from 2007 to 2010 dropped in price from approximately 340K to 280K then from 2010 till present has recovered to approximately 350K. As I turned this property back into a IP in 2012 the 6 year rule is now in it's 5th year.

Now when I move into the new IP(b) this year would it be worth getting a valuation on IP(a) as it would now return to an IP. I am not sure if I am going to sell IP(a) but may sell next year.

My quotes for valuations are around $480.

Also would it be worth while getting a valuation on the IP(b) which I am moving into as PPOR to renovate and live. Or I suppose it wont change the CGT calculation being time based.

Any feedback would be greatly appreciated - I'm moving in next week!

Thanks

 

No valuation needed as it wasn't the main residence from the beginning.

 

Thanks for that Terry

Do you know if the 6 year CGT rule would apply for that property IP(a) as I purchased as IP?

 

Yes you might be able to claim the property as the main residence for the period after you left, but not before you moved in.