What type of valuation is required at end of 6 year period?

Discussion in 'Accounting & Tax' started by Skinman, 1st Jun, 2020.

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  1. Skinman

    Skinman Well-Known Member

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    Hi All,

    I’ve checked all the other 6 year rule threads and couldn’t find he info I was looking for so sorry if it’s already been posted. I’ve got 3 questions below.

    My former main residence has been rented out since June 2014 and I plan to continue to rent this property out.

    Am I correct in thinking I need to have a valuation done to establish a baseline for CGT on any future capital growth?

    If the answer is yes what type of valuation is compliant with ATO? E.g bank desktop / corelogic? Local sales agent or professional valuer?

    From experience which of the above forms of valuation are likely to return the highest Val? I’m assuming this is the best outcome to reduce any future CGT.

    Thanks for any info.
     
  2. Terry_w

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

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  3. Skinman

    Skinman Well-Known Member

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    Thanks @Terry_w so i’m assuming as this is a backdated valuation to 2014 it needs to be done by a professional valuer rather than the local selling agent?

    One last question if I may? The property in question was purchased solely in my name. On moving interstate in 2014 I did purchase another property jointly with my partner in WA that we have lived in since. We don’t plan to ever sell the WA property so therefore aren’t really worried about a CGT event on it.

    Does this have any implications I should consider?

    No worries if it’s a can of worms and too complicated to answer on the forum.

    Cheers
     
  4. Terry_w

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

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    yes val as of that date. doesn't necessarily need to be a valuation by a registered valuer.

    If you claim this property as the main residence the other cannot be exempt but if you never sell it may not matter. but if it has much higher gains it might be worth considering further.
     
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  5. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    A valuation for a past period will generally require a registered valuer. The ATO valuation guidance considers that this requires suitable data and expertise
     
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  6. Skinman

    Skinman Well-Known Member

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    @Terry_w @[email protected] thanks for taking the time to reply.

    I think I may have an old valuation done at the time by a local agent as I was considering selling V renting at the time.

    I’m assuming WA property would default to main residence from June 2020 and therefore worth getting a valuation as of now for potential future use?

    Cheers
     
  7. Terry_w

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

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    was it a valuation with comparable sales or just a price estimate? It could cost you more in tax than the cost of the valuation. Similar to this
    Tax Tip 173: Strategy – Don’t rely of a lender’s valuation for CGT Purposes Tax Tip 173: Strategy – Don’t rely of a lender’s valuation for CGT Purposes

    If you use the exemption on the property you are absent from the one you are living in will be taxed on a proportionate basis so no val needed. Make sure you keep good records of all expenses while living there as these could be used to reduce CGT
     
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  8. Skinman

    Skinman Well-Known Member

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    Thanks again @Terry_w it was a Val from a local RE agent and I think it referenced other sales without giving any specific examples.

    Anyway I had another read of TT 173 you provided and think based on that it’s probably wise to get a professionally paid for backdated valuation with the purpose clearly explained to the valuer. I’m assuming the cost of the Val is deductible at some point as well.

    Got it regarding the current property...I think it’s finally clicked :)...if we do ever sell the one we are currently living in it will be proportional so for example:

    Bought 2014 $900k
    Became main residence 2020
    Sold 2026 $1.3m

    GCT applicable on 6/12ths of $400k = $200k less 50% = $100k taxed at marginal rate (subject to other deductions that may be claimable at the time based on good record keeping as you have mentioned above)?

    Are there any companies or valuers you would recommend to undertake the valuation of the original property?

    Cheers
     
  9. Terry_w

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

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    thats roughly it!

    I don't know any valuers, but plenty out there
     
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  10. Thomacino

    Thomacino Well-Known Member

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    You need a retrospective valuation for capital gain purposes.

    When you find a valuer you trust and has experience in your suburb, state the above and they will understand.
    FYI, the further back you go in time, generally will cost more.

    Major valuation firms include but not limited to;
    Herron Todd White, Knight Frank, Opteon, Acumentis formerly Landmark White, JLL, CBRE, PRP etc, simple google search will yield many more.

    Also, registered valuers no longer exist as the valuers licensing act was repealed a few years back. Its mainly a choice of Residential Property Valuer (RPV), (provisional) or Certified Practising Valuer (CPV), minimum 2 years experience.
    Obviously the CPV carries more weight as it is obtained through experience.

    Also make sure they are registered with the Australian Property Institute (API) or Royal Institution of Chartered Surveyors (RICS), another filter.
     
    Last edited: 2nd Jun, 2020
  11. Scott No Mates

    Scott No Mates Well-Known Member

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    Or the Aust Institute of Valuers.
     
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