Say for example that I obtained a property an lived in it for 6 months and reno-ed it up and then rented it out for 10 years.
What CGT would I have to pay, say the initial value was 200K and the value at the end of 10 years is say 550K?Would the living in the property have any affect on the CGT paid.
If you didn’t buy another PPOR then you will have to pay CGT on the last 3.5 years growth. ie 6 years CGT exemption plus 0.5 years occupancy.
This means you have averaged growth of $35K pa. Over 3.5 years this is roughly $120K.
Remember that you can then deduct stamp duty and other buying/selling costs.
You also get to apply a 50% discount to the CG as you have owned the asset over 12 months.
In effect I am guessing your income for that year will be increased by $60K roughly. Maybe less if you had significant costs to deduct.
As far as paying tax you need to add the $60K to your salary and work out the new tax rate.
None of this is accurate as I have made a few assumptions. You should really ask an accountant.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I think you would possibly be able to claim the first 6 years of it being rented as still being your PPOR (if you didn’t claim another). So the CGT would be the sale price less value at this time.
eg if worth $400,000 at year 6, then sold for $550,000 at year 10 = a profit of $150,000. Less costs of say $50,000 = $100,000.
Depending on the entity holding, you may get the 50% discount = $50,000 taxable capital gain.
This is what would be added to your income, assuming held in your own name by yourself only. You would pay a max of $25,000 in tax.
Terryw
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Thanks guys that helped alot.
Christopher.
I think the above comments are correct if the rented house was claimed as your PPOR (and you didn’t claim another).
However, from what I understand, if the rented house was NOT claimed as your PPOR – you would have to apply the ownership ratio calcuation (eg. owned for 10 years, was not PPOR for 9.5 years) to any CGT liability.
The ownership ratio caluation and example is shown here ..
Originally posted by rozan:I think the above comments are correct if the rented house was claimed as your PPOR (and you didn’t claim another).
Both of the above posts made that very reservation but you are quite right.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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