H i we are looking to selling our current home and living in our negatively geared investment property in order to begin our journey of Pos geared property acquisition. At what point do we have to pay the capital gains tax? I have understood that at the point of sale capital gains tax is paid but if we were to put $100,000 into the debt of $176,000 thus lowering the repayments and allowing money to use for 80/20 pos geared properties, would we then have to pay tax on the $100,000 going into the acoount in that current years tax assessment seeing as it is then becoming a principal place of residence. Hope I am making myself understood. Many thanks Michelle
Hello Shelly,
I hope I have understood correctly, but if you are just selling the first property,(which is your PPOR/primary place of residence), then no capital gains tax is payable. This is in existence as that property was not used to create income.
Hope that hit the nail on the head.
David Femia
Femia Property Group
Property Investment Consultants
http://www.femiapropertygroup.com.auI dont think you have to pay any CGT until you actually sold the property you are moving into and the amount of cgt depends on how many years the house was rented out…
I dont think you have to pay any CGT until you actually sold the property you are moving into and the amount of cgt depends on how many years the house was rented out…So do you mean that if we sell our principal place of residence for say $350K then decide to reside in the now rented property and put about $100K into it then no cap gains tax would be not be paid until we then decided to sell. Now if we do it the other way and stay in our principle place of residence and sell the investment property how is the cgt calculated. If we bought it for $170 and sold for $250 and have only had it 12 months so far, how do I calculate the cgt tax. Many thanks for your reply
Hello Shelly,I hope I have understood correctly, but if you are just selling the first property,(which is your PPOR/primary place of residence), then no capital gains tax is payable. This is in existence as that property was not used to create income.
Hope that hit the nail on the head.
Thankyou for your reply but no I meant that we are currently living in a house and have an investment property. If we were to sell our own property to the reside in the investment property and put say $100K into the mortgage,thus meaning we would go from it once being a negative geared investment property to now becoming our principle place of residence, when and how much tax would have to be paid. Do you not pay any tax at all until a sale eventually if we were to move from it. We assume by us living in it for some time we are also cutting down the amount of CGT to be paid in the future. Many thanks
David Femia
Femia Property Group
Property Investment Consultants
http://www.femiapropertygroup.com.auShelley,
Let me have a crack at this.
Selling your PPOR will not incur any CGT except in unusual circumstances. Did you rent it out during the period you owned it for more than 6 years? Was it an IP before becoming a PPOR? Did you claim any tax deductions for business use or for subletting rooms. Anything else team? As long as these are all no then I suspect you will be OK.
Now when you move into your IP and it becomes a PPOR. This will not incur any CGT. However you will no longer get any tax benefits from ownership as it isn’t generating income. You will get a CGT reduction for the time you live in it. ie if you own it ten years and only rented it out for five then the CGT will only be calculated on that five years.
CGT is only payable on sale of the property.
I am not entirely sure of the question – but if you pay $100K from the sale of your home into your new home loan this this will not incur any taxation.
If you feel you may be moving from this second property into another without selling it ie converting it back to an IP then might I strongly recommend you pay the money into an offset account which will have the same effect.
This will have significant benefits should you wish to use it to purchase a new PPOR. This is a little more complex and outside the scope of your question so I won’t discuss it now.
Good luck,
Simon Macks
Mortgage Hunter
[email protected]
0425 228 985Good summary Simon. I also think that offset accounts are a great idea.
Another idea is to get a valuation of the current investment property before you move in so that when you sell it’s clear what the capitalgain while it was a rental vs when it was PPOR is clear.
Cheers,
Mel
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