Tax Tip 23: The 6 year Absent from Main Residence Rule

Discussion in 'Accounting & Tax' started by Terry_w, 20th Aug, 2015.

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  1. craigc

    craigc Well-Known Member

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    Sorry Terry.
    Will try again.
    IP2 purchased and rented out 2007-2009.
    Used as PPOR 9 months 2010.
    Moved to other PPOR 2011-2014.
    IP2 rented out again from 2011 - .
    No PPOR claim as renting 2014-2015.
    IP2 now to be sold.
    Apart from pro-rata period of when lived in, is there any CG benefit, tricks that can be claimed for 2014-2015 period as used other PPOR 2011-2014?
    Thanks
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    possibly
     
  3. Michael Nguyen

    Michael Nguyen Active Member

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    I have a property purchased in 2010 which I lived in as PPOR for 1 year before leasing out. Been renting since.

    Will I be able to sell this with no CGT implications?

    If I sell in next year (or the year after) I.e. over 6 years since moving out, will I be liable for full CGT?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It could be CGT free.
     
  5. Michael Nguyen

    Michael Nguyen Active Member

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    Hot diggity, i better get an agent to start selling!

    Thanks for the tip!
     
  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Personal advice would be recommended.
     
  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    COULD be....
     
  8. Mike A

    Mike A Well-Known Member

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    you would think it should be simple but alas no

    1. if the property is not used to produce income after you move out e.g. it is left vacant or used as a holiday home then you can treat the dwelling as your main residence indefinitely. Read that carefully.

    Section 118-145.

    (2) If you use the part of the * dwelling that was your main residence for the * purpose of producing assessable income, the maximum period that you can treat it as your main residence under this section while you use it for that purpose is 6 years. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence.

    (3) If you do not use the * dwelling for that purpose, you can treat it as your main residence under this section indefinitely.

    So you purchase a home in Picton. You live in it for 2 years and then leave it as a holiday home never using it to produce income e.g. NO AIRBNB for 20 years. What a nice exemption. Isn't reading tax law fun.
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    There is a catch... No other property can be your main residence while absent from the former main residence. (exceptions for 6 months and compulsory acquisition excluded)

    The vacant property issue can be used while overseas and non-resident for those who can afford it. The CGT exemption always beats the non-resident loss of the CGT discount.
     
  10. Mike A

    Mike A Well-Known Member

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    yes it can work very nicely for someone who goes overseas to work and comes back regularly to Australia and uses the harbourfront property while they are in town for a few months of the year. Many of my asian clients never rent their properties. They just buy, hold and keep and use it occassionally for family and friends. rental income isn't a concern for them.
     
  11. Orion

    Orion Well-Known Member

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    Can this be used for a PPOR that is held within a Hybrid Trust?
     
  12. Mike A

    Mike A Well-Known Member

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  13. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I call it the non-resident main residence. Its a stretch of tax law really but thats the law.
     
  14. craigc

    craigc Well-Known Member

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    Thanks all,
    Mike no.2 is the most accurate description.
    I have contacted you separately through HOW for tax advice.
    Looking at numbers further Reidence from 2011-14 looks like a Capital Loss so likely best to use IP2 as PPOR and 6 year rule.
    Record capital loss from other property.
    Will discuss with you further.
    Thanks!
     
  15. Alex_Alex

    Alex_Alex Active Member

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    Hi, we bought our home in late '98 and continued the existing tenants renting there for 6 months and since '99 has been our PPOR.

    We are planning to live overseas for 3-4 years in the one location and wondering if possible we can still use the 6 year rule to rent our home?
     
  16. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes you can. But it wont be totally exempt as it was first rented out. But there probably wont be any tax payable because you rented it for a short period.
     
  17. Alex_Alex

    Alex_Alex Active Member

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    Thanks Terry,

    Yes I think expenses will cover those first 6 months. Just to clarify does it make no difference if you rent it out first before becoming PPOR?
     
  18. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes it does
     
  19. ESL_M

    ESL_M Member

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    Thanks Terry and Paul for your input on this interesting topic!
    it would be appreciated if you could give some suggestions on Our case:
    We moved to oversea in 2014, both MR and IP being tenanted since. We have no plan to sell MR but might consider to sell IP.
    Questions:
    1, CGT discount entitled once we move back as we become Australian Resident for tax purpose (currently we're non resident) - if this is correct, the capital gain will be 50% discounted for Income tax;
    2, through this thread, I understand we can claim either of these properties as our MR when lodge our tax return 2017; if we move in IP when we're back from overseas and sell it lateron, could we exempt from CGT in full? or just a proportion?
    3, we have no intention to sell our original MR in a long term.

    Thanks in advance.
     
  20. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    1 You won't get the 50% CGT discount while a non resident
    2. only if you lived in both
    if you lived in the IP since purchase and sold it within 6 years of renting it then it could be CGT free.