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Thanks Mark, Do I have to move back into the property or is it enough to be residing in Australia as a resident at time of sale to get the CGT exemption.
Also, if I move back become a resident then sell but I was an expat for > 6 years, do I still get the 6 year exemption for those 6 years I was away? Am I safe to assume the 6 year rule is still in place?
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This reply was modified 4 years, 2 months ago by
propertyboy.
I am only asking because i am an expat and want to understand if I am mising the key point.
I am planning to move back to australia eventually like most expats do. On the basis it truely is my PPR then it souldnt be an issue as long as the 6 year exemption rule still applies. If the 6 year rule no longer applies thne that is a BIGG change. Otherwise, if it is truely a PPR you would be expected to go back live in it to sell it regardless. Even if you sold while resident and you were living in another house could the asset still be classified as a PPR?
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This reply was modified 4 years, 2 months ago by propertyboy.
The above article says
“An Australian Tax Office spokesman said home owners were able to claim the exemption if they sold the property before June 30 or returned to live in it before it was sold.”
So if you move back in to Australia become resident and live in the property then sell it appears the CGT exemption. Does the 6 year rule still apply?
Also, why is that couple making such a big deal? Why would they rush to sell it and not hold and then move back and sell unless they never planned to move back? If they were never planning on moving back they would be hit with the 6 year CGT exemption rule anyway so would then start paying CGT. Is there something I am missing in relation to why there is such outrage?
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This reply was modified 4 years, 2 months ago by propertyboy.
Hi Terry,
Bringing this topic back given I have seen there have recently been changes for expats.
Has the 6 year rule been abolished for expats or is this only if you sell your property whilst resident overseas.
Here is an example situation:
1. house purchased in October 2009
2. Lived in it for 18 months to April 2011
3. Rented it out for another 2 years to April 2013
4. Then lived in it for 6 months from April 2013 to October 2013.
5. Has now been rented ever since October 2013. been based overseas in Singapore since this time with no other PPR.
Say move back to Australia and become resident again and move back into the property as PPR in October 2020 and then in October 2021 sell property:
The property would have been owned at time of sale for 11 years. The 6 year exemption would have lapsed in October 2019 (Oct 2013 to Oct 2019)
Does the 6 year exemption still apply from October 2013 to October 2019 or has this been abolished for those who were expats while away for the 6 year period?
Would there still be entitlement to pay CGT on 1/11 years (from October 2019 when the property was moved back into as PPR in Oct 2020)?
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This reply was modified 4 years, 3 months ago by propertyboy.
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This reply was modified 4 years, 3 months ago by propertyboy.
Assuming a house qualifies as a PPOR, for each interval that it is rented out for >6, then you move back in, then rent it out for another interval >6 years, on each interval it has been rented out >6 years does the 6 year exemption apply to that interval or does it wash away completely once it has been rented out >6 years.
Reason I ask is because:
1. I purchased a house in October 2009
2. Lived in it for 18 months to April 2011
3. Rented it out for another 2 years to April 2013
4. Then lived in it for 6 months from April 2013 to October 2013
5. Has now been rented ever since October 2013.
If I move back in say October 2021, and sell it, (total hold period of 12 years) is the portion that would be taxable 2/12? I can live with this but would really hope I could get the full 6 years at point 5 and hope it doesn’t wash away as I have been there for >6 years
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This reply was modified 6 years, 6 months ago by propertyboy.
Here is an article I wrote a while back:
The short answer is that you get some CGT relief as the period subject to CGT is apportioned.
Example
Bic Dong purchased a home in 2000 and moved in straight away. It is a small residential block and is his main residence and only property.
On 01 Jan 2004, Bic moves out. He ends up renting a property while renting out his main residence. Mr. Dong then sells the property in 2015.
What happens with the main residence exemption? Because Dong was absent for more than 6 years – he was away for 11 years in total.
Bic must first work out the value of the property when it was first used to produce income which occurred on 01 Jan 2004. He can do this by employing a valuer who will estimate what it was worth back at that point in time.
Then he must work out how long the property was rented for (in days to be exact). 2004 to 2015 is 11 years (approx.). 6 of those 11 years are able to be counted as the main residence. Therefore 6/11th of the gain will be exempt and 5/11ths will be subject to tax.
Let’s add in some values:
2000 $200,000 purchase price
2004 $300,000 value at the date he moved out
2015 $800,000
The capital gain to work the tax out on is $800,000 – $300,000 = $500,000
Some expense can be used to reduce this – agents fees on sale, conveyance on the sale etc, but not stamp duty on the purchase or other purchase costs because Bic is deemed to have acquired the property in 2004 at its value then (s118-192 ITAA97). Also, capital works deductions would need to be added back.
Assuming all these amounts to $30,000 the gain would be $480,000
Then the 50% CGT discount will be applied. $480,000 x 50% = $240,000
Only 5/11ths of this would be taxable = $109,090
$109,090 is the taxable gain that would be added to Bic’s other taxable income for the year. The maximum tax he would pay on this would be $53,454 but he may pay much less if his other income was very low.
Had Bic moved back in before 01 Jan 2010 and then later moved out again, he would not have paid any CGT tax. He didn’t do this because he didn’t want the hassle of having to move.
Had Bic decided not to keep claiming the property as his main residence after moving out (e.g. because he claimed another property) then the cost base for CGT purposes would have been the value at the time of moving out which was $300,000
The CG would have been $800,000 – $300,000 = $500,000
Reduce this by the selling costs of $30,000
$480,000 gain
$240,000 after applying the 50% CGT discount because held longer than 12 months.
Tax would be less than $240,000 x 49% (top rate plus Medicare) = $117,600
See
ATO ID 2003/1113
Income Tax
Capital gains tax: main residence exemption – interaction between the ‘absence’ rule and the ‘first used to produce income’ rule
ATO ID 2003/1113 – Capital gains tax: main residence exemption – interaction between the ‘absence’ rule and the ‘first used to produce income’ rule
Section 118-192 of the Income Tax Assessment Act 1997
INCOME TAX ASSESSMENT ACT 1997 – SECT 118.192 Special rule for first use to produce income
Section 118-145 of the Income Tax Assessment Act 1997
INCOME TAX ASSESSMENT ACT 1997 – SECT 118.145 AbsencesWhat would happen if Bic moved back in after 01 Jan 2010, say 01 Jan 2011. Does he have to apply 1/11 or 4/11 to his gin?
That is, if you are absent for more then 6 years but move back in again, can you get benefit of a new 6 year period from the moment you move back in again?
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This reply was modified 6 years, 6 months ago by propertyboy.
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This reply was modified 4 years, 2 months ago by
