Unsure about CGT 6 years exception ruling

Hi All,

We will have been living outside of our PPOR for 6 years in Feb 2022. We are currently living in rented accommodation so it is still classed as our PPOR. We love where we live and do not want to move back although we may sell it in the future so we want to avoid paying any CGT if possible.
I've been doing some research online about this and cannot find anywhere that states how long you need to move back into your PPOR before you can move out again to kick start the 6-year ruling again.

Are there any tax accounts out there that can help me?

Thanks

Matt

 

Here is more info on the rule:
Capital Gains Tax Exemptions | CGT Residence Exemptions.

 

The legislation does not state a minimum period.

 

Yes, There is no minimum statutory period. However, is a property your main residence if you dont occupy it as your main residence ?

Depending on facts it may be wise for this period of time to be brief but not so brief that the main residence arguement is at risk. And this will require possessions etc too. I have even seen people maintain their lease with full intentions to move back in after days or a week. That wont fly. Also if you move in with complete intention to promptly move out the main residence test may never have been met. Part IVA could even be held to apply to the arrangement. Its not unusual for the ATO to throw in Part IVA as a further avenue.

I recently saw someone move back into the former home as their 6 years was running down. They had no sooner moved in and they had to relocate to a regional city as their company relocated for covid. It was move or lose the job and they thought it might even be safer. This is easier to support than playing "leap frog" in a short period of time

 

I had the experience last year of clarifying with the ATO the main residence status of our former PPOR for sale/CGT purposes. We had a long history of alternate occupation/rented out so the question of 6 year reset came up. Although there is no minimum period, it appears that internal guidelines are in use: >12 months is OK for reset purposes with documentation, 6 - 12 months will require further substantiation, and < 6 months will require very sound reasons for the short period and full documentation.
You can have utilities connected, mailing address, electoral roll, moving receipts etc but these are not enough to establish main residence status.
Additionally the following documents were important:
- Receipts for school fees that stated "child's residential address" ( the school was only a few hundred metres away)
- Car insurance that stated "address that the vehicle is kept at night"
- Opal card statements that showed frequent travel from the nearby bus stop
- Home insurance that states "home is occupied by the owner who lives in the home"
- Call records for the landline phone connection
I would also suggest you get the meta data for any mobile phones that will show the location of the phone when outgoing calls are made.
In short it's better to have too much documentation rather than too little. And it really has to be your main residence.

 

I have never seen anything related to 3 months, 6 months or 12 months changing their approach. The 3 month rule is a matter only for a reno / new build in some cases. This doesnt apply to a main residence exemption otherwise. What does attract curiosity and more questions is short duration. May even be easily explained eg working interstate. Went o/seas on extended leave etc. Lost job and moved into vacant property as couldnt rent etc. Movied in with the girl friend. Duration is always better than brief periods.

I have seen a few short period "reset" cases and while it may seem eyebrows get raised if there is evidence they accept it. There is no rule or law that says you cant move into a vacant property to specifically reset the 6 years and being honest and telling the ATO that and showing them evidence of moving in and then occupancy costs in the period and then moving out may satisfy them. Taxpayers have a legal right to minimise their tax affairs. In one the taxpayers moved back in, performed repainting, reflooring and basic repairs then moved back out. A cost effective way to renew for the next tenant. 6-7 weeks. ATO had zero concern and the case officer even thought it seemed a very practical way to deal with the two issues. They did check all family moved ina nd all posessions (yes they ddnt want to pay for storage and had receipts for movers both ways) The matter was detected due to repairs occuring between tenants. The ATO accept such a repair is OK provided it is completion prior to 30 June and the repair related to the tenancy just completed.

The ATO like to see living costs as a indicator of occupancy more than licenses, electoral rolls and other data etc which anyone can change and it means nothing. Mailing addresses are now often meaningless since much mail isnt posted anyway. I have never found them that interested in such matters. Phone calls are of limited use- Its doesnt show a "main residence" just a presence perhaps. What they do seek is utilities, connections being maintained with use eg a water bill and electricity bills for a quarter, etc. Agree Opal card data may be OK - But it may be years too late !! Screenshots may be wise now. They also dont care for or have access to metadata as only law enforcement can access that. The ATO wouldnt seek that unless its a criminal matter. Its above the staff pay grade to create a "investigation". Its a review.

Often such equiries are many years after the residential occupancy and some taxpayers see utility bills from 5 years ago as rubbish and arent retained. I always suggest taxayers who seek to later claim a main residence expemption and absence exemption ALWAYS retain specific records at that time. Pics of the hosue warming party, moving costs and some utilities etc.

The other thing almost all taxpayers get wrong is not having a written CGT record that is continually updated for every property - even their own home. They tell me its exempt. But if they trigger anything that creates a pro-rata CGT issue eg business use, short stay rent, subdividing, knock down rebuild etc then CGT dates and costs may actually be of help. This includes basic evidence of the commencement of a main residence and moving out and occupancy costs etc.

 

My accountant advised that this would be the case and my communication with the ATO (email and phone) confirmed it. The ATO is a professional organization so obviously they have internal guidelines on how to process different situations in order to be consistent.

One of our re-occupations was very similar: 6 weeks duration, painting inside and out, floors sanded and other remedial work done. This particular re-occupation was disallowed as a reset as the intention was to rent the house out again, even though we had all our stuff back at the house, utilities connected etc and were sleeping there every night in the paint smell!

Exactly that - they confirmed that the utilities consumption was consistent with a 5 person family living at the house.

Actually it is the taxpayer who has to provide the supporting documentation, the ATO don't go and get this on your behalf. You are entitled to get the metadata information, for example from Telstra it costs $25 for the last 12 months:
Telstra - Data access - Privacy
By the way what they do have on-line access to is passenger movement records in/out of Australia.

We offered pictures of a child's birthday party (ATO said no, we don't need that). Using the child's date of birth and counting the number of candles on the cake you can work out the date the photo was taken..

 

Why were you communicating wth the ATO over this Fredbear? Was it an audit?

 

I was applying for a withholding variation certificate, as I was not a tax resident at the time of sale.

 

The 6 year rule wouldn't apply in that situation unless it was before the recent changes?

 

Yes the sale was before the June 30 2020 deadline.

 

Thanks all for your feedback and thorough response - very much appreciated!

 

Hi All,

Just wanted to re-open this thread and see if anyone can provide any additional feedback on my previous question.

I now understand the situation in terms of no fixed timeframe to re-classify your property as your PPOR so we will likely move back in for the next 6-12 months.

We are from the UK and will have family visiting over the next 12 months and would be keen to keep our lease going on our rental property for our family to stay in. We will be back in our PPOR before the 6-year expiry, no longer collecting rent and all documentation will prove that we will live there for 6-12 months, electoral role, electric/water etc.

My question is, is it possible to keep a lease active as well as claim PPOR on our owned property? If we sell the PPOR in the future and have to show proof to the ATO to avoid CGT will they want to see proof that our rental lease expired or is it ok to keep it running, even though we won't be living there as it will be used for family visits etc?

Thanks

 

It is possible but it will come down to which is your main residence - there is only one that can be the main. ATO can see rental bond lodgements so they can audit so be prepared for an argument.

 

if the property is still being rented then you couldnt make it your main residence again until the lease has ended and you have moved back into the property.

 

@FredBear - it might be worth retaining copies of your relos arrival & departure documentation, temporary residency & why they're not staying in a hotel.

 

You cant claim a main residence exemption by allowing other relatives to occupy. ONE of the legal owners must occupy ALL the property as their main residence. If the other has a main residwence there is a problem and a family cant have two main residences. If other relatives occupy with them that doesnt stop the claim for absence etc but it may trigger some concerns.

If the other relatives occupy 50% of the property then a 50% main residence exemption may apply for that private use that doesnt produce income. You dont have to have rental incoem to lose the 100% exemption. Same problem occurs with land tax although state land tax tends to give a 100% exemption even in such cases.

 

I think you mean @MattSDY , not me!

Could you terminate your lease and start a new lease in your relative's names? Happened to us a couple of times as landlords - tenant was moving out, but a friend of theirs wanted to move in.

 

@Paul@PAS I think you’ve missed the point. As I read it the relos are taking over the rental property while the OP moves back into their own PPOR to re-establish the Main Residence exemption.

As @Terry_w pointed out, important to keep evidence of what you have done, moving documentation, utilities, post, online shopping deliveries, photos etc to show proof of residence whilst still holding a lease over a property for your relatives to live in.