hi shangrila

the appropriate portion of the original purchase price will determine the cost base, not the value at the time of subdivision. (sorry terry)

http://www.ato.gov.au/individuals/content.asp?doc=/content/00191831.htm&page=70&H70
second example (#58) half way down.

The reason is that for the exemption to apply to an asset (for any…[Read more]

hi andrew,

the details of this situation are particularly important.. I’m curious as to why your friend was living ‘between’ the properties for this period of time.

Regardless of what that situation is, there are three pertinent cgt “rules”:
6 month ‘overlap’:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36888.htm

PPOR 6 year…[Read more]

Hi Jane,

I really do feel for you, 8 years is a long time to be looking over your shoulder. Rest assured that gifts are not taxable, and that you have not been engaged in tax evasion. You have quite rightly declared the interest earned on the money you received, and that is all that is required.

yep thats right.. the one thing you didnt mention was that you have to live in the new house for 3 months before you sell it.
so:
A: original existing house
B: first house you build before subdivision
C: second house you build after subdivision

buy > live in A > demolish A > build B > live in B > subdivide > start building C > sell B > live in…[Read more]

Zeus75 wrote:
If you demolished the front house and built new then subdivided and retained the back block I guess you would also have to pay CGT when you finally sold the house on the back block too.

Well… not necessarily. provided you werent claiming the main residence exemption (MRE) anywhere else, then you’d be able to claim the exemption…[Read more]

In short.. you wouldnt pay CGT on the sale of the front house. But if you ever sell the back house (which you finally move into) there will be CGT payable.. although I’m a little unclear on exactly which period of time it would be payable on.. either from original purchase until you move in, or from demolition of the original house, until you move…[Read more]

it all depends on what interest he is claiming against the rent on that property he moved out of.. he cannot claim interest on loans used to construct the new property which he is now living in, even if those loans are secured against his original PPOR.

Re: What constitutes a business… as graham said, there’s no strict definition, and a little room to move.

The criteria generally considered in determining whether an activity is a business are:
-significant commercial activity
-a purpose of acting in a commercial way
-an intention to make a profit
-a reasonable prospect of…[Read more]

Dan42 wrote:
If you have to pay CGT (say you bought interstate), make sure your accountant does BOTH calculations and chooses the best one. Sometimes the pro-rata calculation gives a better result. (If the house has had a sharp increase in recent years, for example).

Sorry dan.. A pro rata calculation is not available in this case. if you fit…[Read more]

Hi kenny,
your absolutely right, the sale will be a cgt event, but also exempt.

Re: moving out whilst renovating, I simply meant that you didnt actually have to live there during the renovation for the main residence exemption to still apply. I should have been a little more concise, (now I look at my comment it really doesnt make much sense in…[Read more]

hi sumnerstephen,

there’s a couple of pertinent issues.

I have to ask though… when you say “it will have been 12 months in the next couple of weeks” do you mean since you bought the property?

Firstly, provided you satisfy the critera for PPOR exemption, you can extend the main residence exemption for up to six years after you move out. You…[Read more]

terryod wrote:
I have a similar question, a friend of mine moved out of his principal place of residence and moved into a new house. He has been negative gearing the first property since moving out. I said this is not right and he maybget hit by the ATO if he gets audited. Can som on let me know what the go is here?

Terryod: it all depends on…[Read more]

You are very welcome..

Hi new2invest..

Basically no.. sale of your ppor will not be a cgt event.

That said.. there’s a few things which may mean your only eligible for a partial exemption – the period of time between purchasing and moving into the home may be relevant, in short you need to move in “as soon as is practically possible”. Also, if your running a business…[Read more]

Hi House Call…

House Call wrote:
I have a new IP that a quantity surveyor has drawn up a depreciation schedule for.  Can this annual depreciation amount be used against other income?

Depreciation on a rental property is treated the same as any other expense of a rental property… so including the depreciation will reduce profit/increase the…[Read more]

There is a transcript of the erdelyi case on austlii :
http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/AATA/2007/1388.html?stem=0&synonyms=0&query=^Erdelyi

I sent you a private message with details of the summers case… because I couldnt find it on austlii – and posting portions of my reference materials here would probably be copyright…[Read more]

mav86 wrote:
12 months has nothing to do with this, it only relates to investment property to get a 50% discoutn on CGT?

thats right & your welcome

will see if I can find links to more info about those cases tomorrow!

It depends on a few different things, so the actual amounts deductible may vary slightly, but that said.. you will be able to depreciate the cost of the item over a number of years regardless of when it is installed.

So whether its installed as part of the contract, or you pay for it seperately after construction is completed, you will be able to…[Read more]

Well.. theres a lot to consider.

Firstly, you only have to live in the property for 3 months, (12 months relates to the 50% Discount). I couldnt find any concise info about this to refer you to.. because I dont think there’s a specific “rule” about the minimum amount of time. Your really depending on precedent cases such as Erdelyi (2007 ATC…[Read more]

god_of_money wrote:

Whilst its not an elegant solution, and possibly more effort than its worth.. you could sell the 470k property, pay out the $60k owing, purchase another rental/investment property at an LVR of 80% or 90%, and use the remainder of the proceeds of sale to reduce the current loan on the investment property you moved into. This…[Read more]