PPOR and CGT

Peter purchases property.

Signs contract: 01/01/2017
Settles: 01/03/2017
Moves in: 02/03/2017
While there: changes drivers license to that address, pays council rates, water bills, mows the lawn
Move out: ?

1) What's the earliest he can move out and have the property considered PPOR?

2) What is the lastest date Peter can sell his property CGT free? I.e from which event do you add the 6 years ?

3) Peter sells the property to Simon. What event is considered sold: (a) When Simon signs the contract? or (b) When Simon settles the contract?

 

The key issues isnt one that asks ...."how soon". The issue is did he occupy the property as his MAIN RESIDENCE ? . That requires complete and total occupancy. If he does not intend to correctly reside there then it may be construed as not meeting the requirements of occupancy. Short duration occupancy could be expected to generate questions. Arms length factors can mean this is easily evidenced and given credibility. This can be compared to the OP which asks about ceasing occupancy before it has even begun on a public forum.

Example : I had a client who was in the ADF who bought and occupied his new property and four days later was redeployed to another state. As he had no knowledge of these pending orders his occupancy and then moving out was fine. However if he had received the orders a week earlier he may have failed to occupy for one day and never attained a main residence. We have retained on file copies of his removalist costs and copy of his redeployment orders.

2. The 6 year absence rule occurs if Peter vacates a former main residence (which is why the above paragraph is important) and rents the property and he (or a partner) do not occupy another property they live in. If rental income is not earned the property may be vacant for more than 6 years. The 6 years is a single continuous period after he ceases to reside. It can be recommenced by moving back in and then departing. There is no technical limit.

3. The contract date when both parties complete the contract is considered the date the sale occurs. So if you accept Simon contract on the day after he signs that is the correct "contract" date. Prior to that it is a offer only. eg Your acquisition is 01/1/17 not 01/3/17 or even 02/3/17

 

the 'ownership interest' which determines 'ownership period' will occur between settlement date on purchase and settlement date on sale.

the contract date is used to determine the timing of the CGT event.

 

CGT event A1 : Summary of CGT events

 

@Paul@PFI
Can I just confirm (threads like these confuse me).. there is no CGT on a PPOR that has never been rented out, used for business, or any other purpose other than being your primary residence, right? Regardless of time? So the '6 year rule' doesn't apply in that circumstance?

Eg. I've lived in my current PPOR for 3.5 years. I live here with my wife and child, I don't earn any income from it.
I plan on selling anywhere between 3 and 5 years from now.
When I sell, this does not encounter CGT, correct?

P.S Im yet to fill out my forms and send to you. Will do it tomorrow.

 

if you move out of your PPOR then you can elect for it to continue to be your main residence for up to 6 years.

note however that the new property you move into will be subject to partial CGT on sale. If however you moved into a rental property and elect for your PPOR to continue to be your PPOR then it would be CGT exempt and wouldnt need to worry about the other property.

but if you bought a PPOR, moved in as soon as practicable, lived in it for 10 years, never earned income from it, never rented it out, didn't have an election over another property and didn't need to consider any development/trading stock issues then you would never need to consider the 6 year rule as you haven't moved out of it. you have just sold it.

 

generally - but there could be if the property was over 2 hectares in size, was inherited, is owned by a trustee or a company, spouse has another main residence etc.

 

And if you move out and its never used to produce rental income then the main residence exemption continues for a unlimited time.

The other aspect of the 6 years absence is that you can move back in and the exemption continues on and then move out again and the same process applies. There is not a single instance limitation.

One catch to the six years is that if you exceed 6 years by even a day then the costbase for the property changes. A special rule (s118-192) applies the market value on the date it was first rented and the partial CGT would use a revised costbase that may be either higher or lower than the actual cost of the property. This revised costbase would be used to determine the pro-rata CGT gain or loss if and when sold.

 

Mikey, The absence rule doesnt apply. You still live in it and have always done so. So, its covered by the general main residence exemption and based on facts would be 100% CGT free and you can disregard any need to report it or do a calculation.