Tax implications

Hi,

Great site/forum.
I have a question. I have two properties in Melbourne; 1. owner occupied (bought as first home) where I currently reside and 2.investment property (tenanted for 2 years). If I want to sell my investment property with less tax impact, i.e. to pay less capital gains tax should I necessarily move to that property or I can sell it as the first property with capital gains exemption and making owner occupied home my investment? Is this possible or I do have to move to the investment property and live there for at least a year before claiming it as an owner occupied property? Thank you.

 

You need to have lived in the property as your home from the start in order to sell it completely tax free (assuming a profit is made on sale - if a loss no tax).

The main residence only applies once you have made it your home.

If you move into an investment property, the exemption will apply to the portion of time you lived in it as your home.

For example - the home was an investment property for 2 years, you moved into it for one year and then sell it. One third of the taxable gain is exempt.

Their is a rule that allows you to extend the period as your home for tax purposes but it only applies once you have lived in it.

 

I would start by seeking actual advice. You cant avoid tax in this case as you didnt first live there and its taxable up to now but the amount may be less than expected when all issues are counted.

I always recommend two CGT calcs
1. The CGT tax
2. The amount of equity or income it releases. Sell an IP that is neutrally geared and that has no tax impact may be a futile issue

 

Thank you for your replies!

 

Extract equity, get bigger tax deduction (if using equity to generate taxable income) and maintain CG in years to come, job done.