Shane
You do not have to live overseas to claim the PPOR as your residence for the 6 years. You just cannot claim another place. In fact, if you buy one, live in it for a year, move out and buy another one, live for a year, then buy another etc. etc. It is only when you sell it that you have to make the claim as to which one was your PPOR for that time.
LuckyPhil, PPOR’s do not attract CGT, so you could have lived in it a month, and then sold. I say get another valuer, get it valued, borrow as much as you can (LOC so if you don’t spend it there’s no interest) to invest, and then come and rent one of my places!!
That way, probably for the same payment (less even) in mortgage, you can rent a place that is not out in the sticks of Gungahlin, and you can have depreciation, and other tax benefits, while retaining CGT exempt status for 6 years!
Or another option which I have suggested to Bear before is to sell it, but to an investor, and sign yourself up as the tenant, for say 5 years, but give yourself the out after a year or so, but don’t let them be able to kick you out.
Cheers
MelMel – my understanding is that the 6 year rule no longer applies. CGT is pro rata based upon yrs as PPOR vs years as IP. So live in it for 1 year rent for 5 and you pay 5/6ths of the applicable CGT rate. Live for 3 rent for 3 and it is 3/6ths of applicable rate.
Polar
The pro rata one kicks in when you have it as an investment, THEN live in it as your PPOR.
I have not heard any rule changes regarding living first then renting, and the group I meet with every second week in Sydney would have mentioned it if it had come in. Presumably there would have been a bit more publicity too.
Cheers
MelIf that’s the case it’s fantastic. For someone who rents and has IP’s there are a raft of possibilities.
The 6 year rule is still valid
looked it up when answering a question here a few weeks ago the free booklets and info on the web r well worth getting as well on this and many other areas of TAX.Cheers!
Jason
Buy Hold Never Sell
I like the strategy.
We have come to Sydney from Auckland – been here 18months and it took me a year to “get used to” the prices here.
Much of our time has been spent researching the market.
In our view, the market has carried on its growth pattern on unstable economic foundations. I am for one actually looking forward to a rise in rates, as I believe that is what the market needs.
Unfortunately the strength of the A$ is not making it easy for the RBA to increase rates.
For the time being we are going through the process of getting our borrowing and tax structure sorted out. We have a beachfront property (scarce asset) in mind as our first purchase, which will be a investment holiday rental.Our strategy is to buy investment properties going forward, but not just at the moment. An increase in rates WILL bring better opportunity to patient investors we believe. Sometimes the hard part is just being patient and doing nothing (except research).
Why buy and then sell investment properties?
It is okay to “trade” development properties, or property you have refurbished with a view to flicking on at a sizeable profit – however the key here surely is to maximise profit in the shortest space of time.
It makes sense to me, given onerous CGT implications, that if you want to sell something, sell your own home. That is what we would plan to do in time – buy a home for your own occupation, and trade it in every few years (assuming it is profitable to do so).
I am learning so much in this country, but people should be working within the tax constraints imposed by the Federal Govt, and using it to maximum advantage. Think smart.
To sell or to hold?
I, or should I say my family, had this exact same dillema only three weeks ago.
In the end we chose to sell.
Why?
Because we needed/wanted to spend some of the cash.
After doing the sums, I figured we could spend the amount we needed to, put the rest into our PPOR loan and still be better off by at least $10 per week due to the saved interest over and above our rental income. The good thing is, the more interest rates go up, the more I actually save by doing this.
Of course, when we find a new IP, we will still have the money, and hopefully more, available for redraw.
Long term, I may have been better off refinancing my IP to use the increased equity, but for here and now I feel my family is better off with our choice.
Dino
“If you don’t know where you are going, every road will take you there.”
Hi all,
Just to put in my two cents worth – Steve seems to have used both strategies along the way – buy and sell and buy and hold. I guess it’s a choice each of us has to make at some time – if there is a possibility of selling for a good profit, then you can use that money as deposits to buy more properties, which again gives you more choices later on. Or, if you think it’s a good cashflow property, then you may be inclined to hold on to it. It depends on what goals you are trying to achieve. As Steve says – you need to have a plan before you start. Everyone will follow a different path and this is good as there are no rules – just make sure you do the maths.Hello to everyone except MJK.
Only kidding,
Regards
Trish[
]Hi,
Here’s my $0.02 even though I only have 1 positively geared property so don’t have much qualifications in this area.
Alf, if you could make the property cash flow positive before depreciation by managing it yourself then I would hold on to it because it would be putting cash into your pocket each week.
If you can’t or don’t want to, then sell. You could earn a better income return in another investment and take your 50-60000 CG and reinvest it for higher returns. Don’t lose money every week.
LuckyPhil, if you didn’t have the “bad” consumer type debt I’d say hold but would you be better off selling your home, wiping your car and credit card debt, taking the CG and reinvesting it for better returns, then start automatically saving or investing 20% of your weekly income into some sort of investment be it a managed fund or property to add to your income each year and NEVER using consumer debt again ie pay cash for everything (or the modern equivalent of use the credit card but pay it off at the end of the month). With rentals approx half of a mortgage pmt you will have more cash to add to investments.
Skippygirl[8D]Hi again,
I think we have opened the Pandora’s box here. As usual this is great discussion and learning for me.
Re the 6 year rule. I have seen it make a difference of over $4,000 on a tax refund compared to a prior accountants uninformed projection of $250. That was just this last financial year.
Mel .. yep, I have always thought that everyone should rent from one another. I betcha if we did the ATO would change the bloody ruling though.
Skippygirl .. you have read my mind. I should clarify, I have already done the debt consolidation. No ute payments, no credit card debt.(I have not touched the card for months). I owe $220K on a PPOR with a “drive-by” bank valuation of $255K. Agent reckons I’d realise $300K. I only need just over $275K value to get under that elusive 80%. By the way, you are more than qualified to comment, as I believe very few people here have achieved positive cash flow properties.
I want to get off the merry-go-round, your collective discussion is appreciated.
Kind regards, Phil
p.s. considering posting a new topic with 2 very basic questions. I trust that you guys will bear with me in my asking.
looked it up when answering a question here a few weeks ago 
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