Selling investment property and CGT

Hi Everyone

I am thinking of selling a investment property and using the funds to put towards a ppor but I would have to pay CGT . I purchased the property 14 years ago I was living in it for 6 months then moved out and it has been rented the whole time since then . If I moved back into the property how long would it have to be for to avoid paying CGT ?

thank you

 

The days between the time you (and your family) all move in and with all possessions ...Up to the date you sign the contract. So the taxable gain is prorata with a MINOR impact of the new occupation. Its going to cost more to move back in than you save I suspect. Moving in has zero effect on past CGT impacts. Its like adding three drops of scotch to a glass of water. You will never avoid CGT by moving back in.

You may need to use s118-192 and the 6 year absence rule MAY be a option.

I always recommend you get advice and run the real CGT numbers so you know what the estimated cost may be. Then run numbers of the net equity after tax is released to know what the sum is that sill pay down the home debt.

 

You would need to die in the property to avoid paying CGT.

 

Or not sell

 

- consider 6 year rule
- third element costs i.e. costs for which you couldnt claim a deduction (might be small if only lived in it for 6 months)
- tax planning - maybe sell in year when you expect a lower income - look at super contribution strategies

 

3rd element costs are generally poorly understood even by some tax agents. They cant always be used and knowing what they are (pre s118-192 is one example), when they CAN be added to the cost base etc is important. Just as important as the reduced costbase issues if you have been claiming QS deductions.

In addition to 3rd element are the other "non-deductible" issues that could reduce or affect CGT. eg Capital expenses, improvements and depreciable assets acquired after purchase (which may be in the tax return or not)

Few accounting firms offer their clients a CGT record keeping tool and its a weakness. Only with diligent CGT records can you determine what the 3rd element costs are and continually track them.

The detailed issues in the CGT record keeping tool indicate the complexity in CGT matters. Its not intended to calculate CGT but act as a resource to capture information for the future. Here is a copy for those interested. Its a rare thing to find I will admit. Strange that few accounting practices offer this. Possibly a sign of those who arent property savvy ??

 

Yes a CGT record keeping tool is essential for any property investor and a few good ones like yourself are ensuring they are kept and maintained.

Ive seen a few firms who do offer them. The more progressive ones.