Forum Replies Created
Generally there is no time frame in the law to re establish your PPOR. You just need to be able to prove you have lived there.
You may not have to move into the property to qualify for the PPOR concessions depending on your history of the property and whether it still qualifies as your PPOR under the 6 year absence rule. If it does, then you don’t have to move back into it, you just need to sell it at the time you are a tax resident of Australia.
Cheers,
Mark
It appears the key is to make sure you are a tax resident of Australia when you sell.
If you are as resident at the time of sale, you get all the other previous exemptions like the 6 year absence rule.
Therefore, if you are outside the 6 year time period, you can still get the 6 year exemption and then be taxable on the days that exceeds it.
You do not need to move back into the property to claim the residence exemption if you have previously lived there.
However, moving back in does restart the 6 year absence rule again so you can get another 6 years exemption if you move out and do not have another residence that you own.
Cheer,
Mark
Hi all,
Steve has asked me to clarify some of the issues raised.
The Bill initially introduced (8/2/18) to remove the CGT exemption for non residents lapsed when the 2019 Federal Election was called.
Unfortunately the Bill was reintroduced on 23/10/19 and was given royal assent on 12/12/19
Key points are:
– The measures apply from 9th May 2017;
– Individuals who are foreign residents at the time of the CGT event (contract of sale), are not entitled to the CGT main residence exemption;
– There are limited exemptions available where the taxpayer satisfies a ‘life events test’ (has died, divorice or terminal medical condition applies) whilst a foreign resident and they have been overseas for less than 6 years;
– There is transitional relief for taxpayers who held the property before 9th May 2017 and the property is sold on or before 30th June 2020
Therefore, absence rule does not apply if property sold whilst a non resident of Australia.
If sold when a non resident, you lose all concessions including the valuation when first rented to inflate the cost base (Sec 118-192)
It appears however if you return to Australia and become a resident, you will still get the concessions.
Below is an extract from the legislation – link provided for those playing at home to make it easier to read rather than my sloppy copy and paste in a forum post.
Example 1.2—Main residence exemption denied Vicki acquired a dwelling in Australia on 10 September 2010, moving into it and establishing it as her main residence as soon as itwas first practicable to do so. On 1 July 2018 Vicki vacated the dwelling and moved to New York. Vicki rented the dwelling out while she tried to sell it. On 15October2020Vicki finally signs a contract to sell the dwelling with settlement occurring on13 November 2020. Vicki was a foreign resident for taxation purposes on 15 October 2020. The time of CGT event A1 for the sale of the dwelling is the time the contract for sale was signed, that is 15 October 2020. As Vicki was a foreign resident at that time she is not entitled to the main residence exemption in respect of her ownership interest in the dwelling.
Capital gains tax changes for foreign residents19Note: This outcome is not affected by:•Vicki previously using the dwelling as her main residence; and •the absence rule in section 118-145 that could otherwise have applied to treat the dwelling as Vicki’s main residence from 1July2018 to 15 October 2020(assuming all of the requirements were satisfied).Example 1.3—Main residence exemption applies Amita acquired a dwelling in Australia on 20 February 2003, moving into it and establishing it as her main residence as soon as it was first practicable to do so. On 15 August 2021Amita signs a contract to sell the dwelling and settlement occurs on 12 September 2021.Amita used the dwelling as follows during the period of time for which she owned it:•residing in the dwelling from when she acquired it until 1October2007;•renting it out from 2October2007 until 5 March 2011 while she lived in a rented home in Paris asa foreign resident (assume the absence provision applies to treat the dwelling as her main residence);•residing in the dwelling and using it as a main residence from 6March 2011 until 15 April 2012; •renting it out from 16April2012 until 10 June 2017 while she lived in a rented home in Hong Kong as a foreign resident (assume the absence provision applies to treat the dwelling as her main residence); and•residing in the dwelling from 11 June 2017 until it was sold.The time of CGT event A1 for the sale of the dwelling is the time the contract for sale was signed, that is 15 August 2021. As Amita was an Australian resident for taxation purposes at that time (as she had re-established her Australian residency) she is entitled to the full main residence exemption for her ownership interest in the dwelling as it is, or is taken to be, her main residence for the whole of the time that she owned it.Main residence for part of the ownership period1.30The partial main residence exemption generally no longer applies if, at the time a CGT event occurs to the ownership interest in a dwelling, the individual that owns it is a foreign resident. [Schedule 1, item11, paragraphs118-185(3)(a) and (b)]1.31An individual who has been a foreign resident for six years or less may beable to access the partial main residence exemption if certain life events occurduring that period of foreign residency.[Schedule 1, item11, paragraphs118-185(3)(a) and (bCheers,
Mark Unwin
Hi,
You want to be selling the depreciable assets at their written down value so that you do not make a profit or loss on them. These assets are not eligible for the capital gains tax discount. the best thing is to include a depreciation schedule in the contract of sale showing the assets at their written down value.
To calculate your capital gain, your cost base will be reduced by the depreciation claimed since the beginning.
i.e. Cost base = purchase price + purchase costs + capital improvements + selling costs – depreciation claimed
Cheers,
Hi Rob,
Capital Gains Tax is calculated on the contract date. To get the 50% discount, you effectively need the property for 12 months and 2 days between those contract dates. Effectively, a sale after 3/2/08 would have you eligible for the discount provided it is an investment asset.
Cheers,
Mark
If you’ve held the property for more than 12 months (contract date, not settlement date) and assuming it is in your personal name, you will be eligible for the 50% capital gains tax discount.
Therefore, even if you are on top marginal rate of 48.5%, your effective tax rate is 50% of that (24.25%).
That’s whey when using a trust for property investing, capital gains are always distributed to an individual and rental income can be distributed to a corporate beneficiary (if required) to cap your tax rate at 30% on ordinary income.
cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Tom,
The cost can be paid by the trust as it relates to the running of the trust structure.
A company trustee shouldn’t be trading in its own right and therefore will not have a bank account to pay such expenses.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Property Passion,
The answer is no.
In order to claim GST, you must either be registered or required to be registered. This means that is must be in the course or furtherance of an enterprise.
Simply put, if you were building the property to on sell, you would be regarded as running a business and be required to register for GST. You would be able to claim the GST credits however GST is also payable on the sale of new residential property.
As the property you are building is your PPOR, you will not be able to claim GST or a tax deduction.
Regards,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Meetrix,
If you are moving to Australia permanently and considered to be an Australian resident for tax purposes, you are assessable on your worldwide income.
You would have to check with your accountant in the Netherlands but I’d imagine you would still have to do a tax return for your rental property over there also.
If you have to pay tax in the Netherlands, you will receive a tax credit on your Australian tax return.Regards,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Shrekster,
These costs are know as borrowing costs and are claimed over the life of the loan or 5 years (which ever is the shorter).
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auThe profit margin on the wrap is not assessable until the property settles. Wraps do not fall under CGT and are taxed as ordinary income (there CGT discount will never apply).
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Bardon & Tony,
My understanding is that there is a 15% withholding tax on the dividends paid from the U.S to Oz.
The withholding tax is offset against your Australian income payable on the dividend.
Depending on which state you incorporate your U.S C Corporation, you may only be paying 15% income tax in the U.S.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Bardon,
The LLC can purchase the property and rental income can be distributed to a C Corporation you setup (U.S company). U.S state & federal tax is paid on this.
Capital gains the LLC dervies are distributed to your Australian trust and taxed in Australia.
To get the money from U.S to Oz, the C Corporation will need to pay a dividend to your Australian trust. U.S withholding tax is withheld on this payment.
Regards,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Landt,
The valuation method doesn’t mean you pay more or less tax. It is dependent on how much the property has gone up in value whilst it was your PPOR.
You can only have one PPOR (there is a small time limit where you can claim both in between moving). Therefore it is your choice whether you treat your IP as being your PPOR (in which case you will have to pay CGT on your new proprty) or elect to have the new property as PPOR.
Once you have two properties, you will not be able to avoid CGT (unless the property market doesn’t go up!)
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi fellow Tiger fans,
It is a great start to the season and a win is a win but lets put it in perspective.
We have beaten teams that finished 2nd & 3rd last in 2004 and Freo in Melbourne (they were a disgrace last Sunday – but it was enjoyable to watch![biggrin].
Hey Skippygirl, I was at that 1995 final also. What a game, bring back Matty Knights!
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auOshen,
I may have read your post incorrectly but just to clarify –
You will only be able to claim the loss if your deductions were greater than your income. If your deductions result in your income being between $0 – $6000, you will not be able to carry forward.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auThe tax office is okay with you doing this provided the valuation is fair. (i.e. independent valuation).
There are no capital gains tax implications however your cost base will become the valuation of the property once it is available for rent.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auThat’s right Derek.
When the property is originally your PPOR and then changes to IP, valuation method is taken.
When property is IP that changes to PPOR, number of days to used.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Jenny1,
If the property was first purchased as IP, you must pro rata the number of days you held it for investment as opposed to the number of days PPOR. The capital gain is then reduced by this %.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auSpot on Jules1
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.au
