Capital Gains

Hi guys,

I have a question about capital gains tax. If I have lived in my PPOR for 5 years, and I rent it for under 12 months and then sell it, would I have to pay capital gains at all? Or do I only qualify for the 50% discount?

Thanks! Looking forward to hearing your response.

Tambo2202

Hi Tambo,

It depends on where you will be living while your PPOR is being rented. Are you pourchasing a new PPOR to live in, or are you renting?

You can only have one PPOR at a time, so if you have bought a new PPOR, then you would be up for a small amount og CGT.

Get a valuation when it is ready to be rented, then your CGT is the difference between your sale price, less the valuation, less 50%.

If you are renting, there would be no CGT payable.

unless you've been renting your main residence out for more than 6 consecutive years, any income-producing activity is ignored and the main residence exmeption applies (so any gains will be cgt-free).

as far as only having one main residence at any one time, you actually get a bit of relief here - the lesser of 6 months or the time taken between the acquisition of the new main residence and ownership of the previous main residence ending. this exemption only applies however, where there was no income-producing activities (so you can't have rented it out then say you say two main residences).

Eve
Tax Accountant

To clarify, if you rent your PPOR, you DO NOT qualify for the 6 month overlap provisions in the main residence exemption.

Dan is correct

INCOME TAX ASSESSMENT ACT 1997 - SECT 118.140 Changing main residences

             (1)  If you * acquire an * ownership interest in a * dwelling that is to become your main residence and you still have your ownership interest in your existing main residence, both dwellings are treated as your main residence for the shorter of:

                     (a)  6 months ending when your ownership interest in your existing main residence ends; or

                     (b)  the period between the acquisition of the new ownership interest and the time when the ownership interest referred to in paragraph (a) ends.

             (2)  Subsection (1) only applies if:

                     (a)  your existing main residence was your main residence for a continuous period of at least 3 months in the 12 months ending when your ownership interest in it ends; and

                     (b)  your existing main residence was not used for the * purpose of producing assessable income in any part of that 12 month period when it was not your main residence.

Terryw
Finance Broker
Solicitor

Thanks everyone for replying. So to clarify, once I move into my new PPOR and rent out my old one. I will have to pay capital gains if I decide to sell it. That's what I always thought and a guy I was speaking to confused me and told me I might not have to.

Thanks!

You might not have to.

Once you move into a place and establish it as your main residence you can keep treating it as the main residence while you are absent. But if you purchase a new place to live in you will need to chose which one to keep as the main residence for tax purposes - its one or the other but not both (unless 1 is not earning income). Since you have a choice you should weigh up which one has the most growth during the period of ownership and chose that one.

Terryw
Finance Broker
Solicitor