All Topics / General Property / cap gains tax on own residence?

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  • Profile photo of fulloutfullout
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    @fullout
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    Whats the rule for CGT on own residence?
    If we stay there for how long then there’s exemption? and for how much?
    I am in VIctoria

    ***********************

    Profile photo of kelly1100kelly1100
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    @kelly1100
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    By own residence I take it you mean your principal place of residence…in that case no CGT on the house and 2 hectares of land, regardless of how long you have had it. Anything over 2 hectares – you’ll pay CGT on it if it’s been purchase after the implementation of CGT (Sept 1985 or thereabouts)

    Profile photo of Mortgage HunterMortgage Hunter
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    @mortgage-hunter
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    Kelly is correct. To take it further you can move out and rent that property for up to six years and retain exemption provided you do not purchase another home.

    Cheers,

    Simon Macks
    Mortgage Broker
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of melbearmelbear
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    @melbear
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    Simon, you can actually purchase another home to live in. You just have to decide which one you class as your PPOR and therefore CGT exempt. I’ve stated in another posting that you do not even have to make this decision until you sell, and you can work it out based on which option is best then!![:)]

    Cheers
    Mel

    Profile photo of fulloutfullout
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    @fullout
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    okok, tell u whats going on.

    My parents own the apartment I live in. And they come here from overseas to stay about once a year for a few months.

    We also have another Investment apartment in the city.

    So say if we sell the one I am living in now, can we be free from CGT?
    And we can move into the investment apartment we own to stay,

    ***********************

    Profile photo of Mortgage HunterMortgage Hunter
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    Simon, you can actually purchase another home to live in. You just have to decide which one you class as your PPOR and therefore CGT exempt. I’ve stated in another posting that you do not even have to make this decision until you sell, and you can work it out based on which option is best then!!

    Exactly Mel. As I said the exemption can only be retained for the opriginal property provided you don’t own another PPOR.

    However you can buy another home and sell the first one up to 6 months later and have it for both.

    Cheers,

    Simon Macks
    Mortgage Broker
    mortgagehunte[email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of TheRC1TheRC1
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    @therc1
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    Can you only do this once?
    I think you can do this several times.

    Here is a senario:
    You buy a place as your home (primary residence) and then upgrade after a few years (ie new home= new primary residence). The first place you rent out. Before six years is up on the first place you sell it.

    You could do this again for the next upgrade.
    The tax office looks at the intention of the loans to see if you can claim interest. Both original purchases were not originally for investment purposes.

    To make the six rule even more secure in the eyes of the tax office you might need to move back (to renovate it) then sell.

    What do you think?
    Is this possible?

    Profile photo of melbearmelbear
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    @melbear
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    Hey Simon, I wasn’t arguing/disagreeing, just clarifying. Your post actually said ‘home’, and you can differentiate between a ‘home’ and a ‘PPOR’. I think you and I both understand, but want to be crystal for anybody out there who’s learning the concept.[:)][:)]

    Hi TheRC1

    You can only have one PPOR at any one time, so while you were renting out your first home, and claiming it still as PPOR, you cannot claim the second house as PPOR.

    So if you moved out of house 1 and rented it for four years and then sold, paying no CGT as it was your PPOR, meanwhile living in a new house you had bought, for those four years, you could not claim the new house as PPOR, and so when it came time to sell it, you would pay CGT for those four years. The ATO doesn’t care in this instance about the loans (ie purpose etc.).

    Cheers
    Mel

    Profile photo of Mortgage HunterMortgage Hunter
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    Mel as always you are right!

    The RC – I think this is wrong. When you purchase the next home you forfeit the CGT exemption on the first one.

    It would work fine if you rented the second home but the minute you buy another home they won’t both qualify. Take a look at the ATO website for a full explanation.

    Cheers,

    Simon Macks
    Mortgage Broker
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of smorossmoros
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    @smoros
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    Hi All,

    What is the minimium amount of time you are required to have a place as your PPOR to avoid CGT. I assumed it was 6 months, but i heard you can get away with it in 3 months???

    Forget where you live for a second, eg. Live with parents, or sharing a flat with a mate. You purchase a new IP, you live in it for 6 months, then move out buy another IP and live in it for 6 months also. If you sell the first place, even though you lived in it for 6 months and are now living in the second IP, you will still have to pay CGT is this correct?

    Is there are way that you can bypass CGT in the above scenario?

    Steve

    Profile photo of davidfemiadavidfemia
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    @davidfemia
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    Smoros,

    Assuming that the first property was not leased at any time, and you moved directly into the next property, then CGT would not apply.

    If it was leased, then CGT would be applicable to the time that it was an income producing asset.

    Also keep in mind that if the property is owned for more than 12 months, you will be eligible for the 50% reduction in CGT.

    David Femia
    http://www.femiapropertygroup.com.au

    Profile photo of melbearmelbear
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    @melbear
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    Steve

    Simon and I have both answered your question in the preceeding posts. If you purchase an ‘IP’ to live in it for six months you are really purchasing a PPOR – yes?

    If you move out in six months to a new house you have bought, you will be making a decision as to which of the houses is your PPOR.

    If you are doing what Simon said, to have the overlapping 6 months where you can have two PPORs, then David is right in saying that it cannot be rented out before you sell it. If you have rented it out, then the two PPORs rule will not happen, and you need to make the choice as to which is your PPOR. If you choose the first one (that you have sold afte one year) there will be no CGT on sale. However, when you go to sell the second one, it will be pro rata based on how long you have lived there.

    My question. Why would you be looking at selling a house every six months?

    Cheers
    Mel

    Profile photo of smorossmoros
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    @smoros
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    quote:


    Steve

    Simon and I have both answered your question in the preceeding posts. If you purchase an ‘IP’ to live in it for six months you are really purchasing a PPOR – yes?

    If you move out in six months to a new house you have bought, you will be making a decision as to which of the houses is your PPOR.

    If you are doing what Simon said, to have the overlapping 6 months where you can have two PPORs, then David is right in saying that it cannot be rented out before you sell it. If you have rented it out, then the two PPORs rule will not happen, and you need to make the choice as to which is your PPOR. If you choose the first one (that you have sold afte one year) there will be no CGT on sale. However, when you go to sell the second one, it will be pro rata based on how long you have lived there.

    My question. Why would you be looking at selling a house every six months?

    Cheers
    Mel


    Hi Mel

    In summary i kept an apartment un rented for 6 months, at present i am living at my parents house… I am about to purchase another old apartment that i will be renovating, so I was trying to see if there are any legal loop holes in the systems that would enable me to escape paying CGT on both of those particular apartments when sold. From reading this thread, it sounds like I cannot do this…

    Both of these apartments have been purchased for short term investments, the first was through developers i know which was off the plan, which will deliver me a high profit (hence why i don’t want to pay CGT) and the second was a bargain that i already have a buyer for in 9 months due to it’s location, again delivering a high profit, so i do not want to pay CGT if possible.

    I know.. i do wierd things, but it’s all about the $$$$$$

    Steve

    Profile photo of The DIY Dog WashThe DIY Dog Wash
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    @the-diy-dog-wash
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    Post Count: 696

    Back to Fullouts original question,

    It would depend whether the unit you live has been treated as an investment property, meaning you pay rent as income to them and they claim costs as a tax deduction. If so then it is an investment property. If not then you are living in your families home and you “may” be CGT free.

    Of course check it with your accountant.

    Cheers
    Leigh K[:D]

    Carve your own path and lead the way …

    Profile photo of melbearmelbear
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    @melbear
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    Post Count: 2,429

    Hi Steve

    Sorry, I thought you were suggesting that you were going to be doing it quite often, rather than as a once off.

    Have you ever lived in the apartment that you currently own? If yes, and you haven’t rented it out – you should be able to sell it with no CGT. If no, but it’s never been rented, you would have to check with an accountant/solicitor/ato as to whether it would qualify as your PPOR.

    If you are in the process of selling it and moving into your new place, as Simon said, you have six months to sell it without CGT. You can then claim your new place as PPOR from purchase date, and so sell it without CGT also. I think you need to talk to your accountant before making any decisions – from what I’ve read, you might be able to swing it, but there’s a couple of things I’m unsure about with your situation as stated above, so I will not advise you absolutely.

    Cheers
    Mel

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