Ppor cgt tax implications

hi
I was wondering if anyone can answer this for me ?

We are settling on a property this month the plan was to Reno the place keep it for the year then sell and if Iam right there is no tax to pay correct?

How about if we sell in 6 months after settle would we still pay cgt ? And is it reduced at all as it's a ppor ?

Thanks a lot

 

Depends on the circumstances. Sounds like there could be tax - income tax, not CGT, because you are buying with the aim of selling for a profit.

If there was no intention to make income from it then there may be no CGT if it was your main residence and other requirements met (under 2 hectares, not income producing, no other property claimed etc). 6 or 12 months doesn't change things.

 

Yes ok that makes sense
I guess we just need to work out if we sell it quickly and pay income tax the will move us in to the next property quicker then holding it for the year to advoid the tax

 

Selling it quicker won't necessarily change the tax situation

 

So there would still be tax to pay if sold after 1 year ?

 

If it's a live in Reno and you're making it your PPOR, as in, you actually live there as your Residence whilst you complete the renovations. You can sell it CGT free at any stage. 6 months, 1 year, 2 weeks. Doesn't matter as long as you make it your Main Residence.

Correct me if I'm wrong.

 

The exception is if the property is held on revenue account - such as if you were doing this in a business like manner.

 

This is bought for a roof over our head and a ugly house that's in poor condition so we will give it a new life and freshen it up and possibly do that again a few times to we have paid a big chunk of one of them

 

The first key issue relates to the extent of renovation. If you can FULLY occupy the property after acquisition and then continually while renovating around you then it should be exempt. If you need to not move all your property in then that's a concern and you may not actually meet the main residence exemption to start with.

A second concern is that after renovation you MUST retain occupancy for at least three months.

A third key concern is the renovation cannot be substantial... ie a rebuild. eg You take a dump that is uninhabitable and renovate to like new. This would never meet the definition of a main residence and will result in a GST issue also.

My final concern is if you are going this to "profit" then the main residence exemption may never apply. Its poorly explained in TD 92/135. Dont follow the simple example in that too literally. The key factor in that ruling is an intention produce profit.

Read this ATO guidance on how to treat a property as your main residence without actually living in it if that is a concern. Treating land as your main residence
I always find that using this "rule" comes with risks that the ATO can argue your intention was to profit but of you occupy it first then renovate, move out and back in etc this issue can be averted.