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  • Profile photo of CorieCorie
    Participant
    @corie
    Join Date: 2009
    Post Count: 113

    A friend of mine has just bought his first IP. His accountant has told him that if he makes it his PPR for 6 months in the first 12 months of ownership he will be exempt from capital gains tax forever.

    I seem to think she is getting this mixed up with the first home owners grant.

    As I understand it CGT is proportioned. There is a particular rate in the period it is your PPR and if you then decide to use it as an IP later on down the track you will pay a higher rate for that period. Obviously this is all applicable when you decide to sell.

    Can anybody clarify this for me?

    Profile photo of BankerBanker
    Participant
    @banker
    Join Date: 2010
    Post Count: 371

    Is his accountant Wayne Swan?

    Profile photo of IP FreelyIP Freely
    Member
    @ip-freely
    Join Date: 2008
    Post Count: 353

    I'd be looking towards another accountant.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    If he lives in it first before renting and later moves out it is possible to rent it out and retain the CGT for a period of up to 6 years. If he moves in again before the 6 year period and then out again the period starts  again.

    If he moved in and then out and decides not to rent it but to leave it empty then he could keep it CGT free indefinitely.

    There are a few provisos.

    see section 118-145 ITAA 1997

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    Profile photo of Dan42Dan42
    Member
    @dan42
    Join Date: 2008
    Post Count: 619

    I'd say something has been lost in translation.

    If it is being rented out in the future, the maximum CGT that can be avoided is 6 years, as long as your friend does not have another PPOR at the same time. As Terry says, your friend can move back in before the end of the six year period, and this re-triggers the 6 year rule.

    The '6 months' would be about the FHOG, not CGT. There is no defined amount of time that you have to live in a property for it to become your PPOR.

    Profile photo of CorieCorie
    Participant
    @corie
    Join Date: 2009
    Post Count: 113

    Thanks guys  just a couple of more things,

    Once you begin to rent it out are you still eligible for all the normal deductions you receive with a normal IP?  i.e interest payments depreciation, repairs etc.

    Also if there is no defined amount of time you have to live in a property for it to become your PPR how does it qualify as your PPR.

    Profile photo of Dan42Dan42
    Member
    @dan42
    Join Date: 2008
    Post Count: 619
    Corie wrote:

    Also if there is no defined amount of time you have to live in a property for it to become your PPR how does it qualify as your PPR.

    There are a couple of tests to determine if it is your PPOR. Have you connected the electricity, gas, phone in your own name? Have you changed your address on the electoral roll, and your drivers license. Have you had your mail redirected to the new PPOR.

    These type of things show your intention for the new house to be your main residence. There is no set time limit in the legislation, but I think the courts have used a period of three months as a type of guideline.

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