PPOR CGT Exemption

Ok - Sell your MR and zero tax. Then move into IP of 9 years and do improvements and sell after 1 yr.

Rough numbers (ignoring duty, selling costs etc)
$1.500,000 sale proceeds less $ORIGINAL COST $100K Less CGT improvements $500K
(MktVal cant be used). 6yr rule doesn't apply but occupation of home as MR does.
Profit on sale = $900K
Less 1/10th MRE exemption $90K
Total Profit $810K
Less : 50% discount
$405K taxable
Say 140K tax.
The Cap Gain may be reduced by other ownership costs in year ten eg rates, etc...

Also remember that Div 293 tax and Budget Levy and MedicareCare Levy S/C may / will apply on such significant extra income.

 

In the example I was referring to the erosion through time so that the one month is trivial

eg : first month is taxable. Over three years that's 1/36th of the cap gain that is taxed.
Over ten years its 1/120th of the cap gain. Over 20 years its 1/240th of the cap gain.
Of course as time progresses the actual total gain (may) will rise.

ie : Lets assume $20K after three years. $277 is taxable
After 10 years say gain is $100K. $416 is taxable
After 20 years say gain is $200K. $416 is taxable.
$416 as a % of $200K is trivial ie 0.208%

 

Remove the word "straight".. The MRE only requires the property was occupied as residence. Whether it was previously a IP is not a factor. (It was not eligible for the MRE until you occupied it) After that date it remains a main residence until an event stops the MRE operating. ie expiry of 6 years, occupying another MR etc.

 

So the 6 years can only apply to a time period after you moved in?
Can it start when you move out (and it becomes an IP again) or does it start from when you move in?
Do you need to get a valuation when moving in?

 

Let me see if I can answer this correctly:
1) Yes after moving in and then out, the 6 years starts unless it's been vacant or not producing income
2) Starts when you move out and it starts producing income.
3) Maybe - from what I understand, no if it has been a IP since purchase, yes - if it has been a PPOR since purchase.

 

I would say cost base $100k purchase price plus $500k renovation, capital gain $900k, deduct 1 year $90k 50 % discount unless your reno disqualifies it, then halve $810k, assessable $405k

if the reno made it taxable (as it might be a profit making scheme), then cap gain $400k, profit on reno $500k, assessable income $700k