Hi all,
I wish to understand the 6 year rule better, namely, I want to know how to use it to avoid CG Tax. I will be doing a small development soon with 3 new townhouses. My understanding is that if i live in a dwelling for a ?? period of time, i avoid paying capital gains tax. How long is this period? Can anyone explain this rule to me please. Would it be possible to live in one for 3 months, sell it, move to the next for 3 months and so on?
Thankyou
I’m not an accountant, but I reckon it would be all clear 100% on the first one, but not on the second and third ones if you’ve rented them out… the ATO would work out some sort of percentage payable depending on how long you had tenants in there (for the 2nd and 3rd one)
I do know you can only have one place as your PPOR at a time… if you live in it from settlement (or completion) and then move out, making it an IP, then it is CGT free for 6 years… as long as you don’t have another PPOR in that period… talk to an accountant who knows property (cos many don’t)
cheers
rHi Richmond
Thanks for your advice. ANy chance you are from Richmond NSW?
No I’m a long suffering Tigers supporter in Vic
Richmond
You on e-mail at the moment? Doing any investing?
Crackles
The 6 yr rule you are refering to is when you are say transfered with work and rent out your PPR while renting at your new location. the PPR exemption will apply for 6 yrs.
I think what you are really asking is, “Am I carrying on an enterprise” If yes the ATO would seek to tax you on the sale(both income tax and GST,assuming the development turnover is greater than $50K). You may get away with the first townhouse, the longer you live in it the more weight to your argument – and thats all it is – an argument.
Get some advice from an accountant who has a demonstratable record in this area for both structure and tax planning
Regards
TonyWell Crackles if you insist on being involved in dubious practices, what do you (and others) think of the following :
Build two of the townhouses in such a manner that they are interconnected and then live in them.
You will miss out on rental for the second one but,who knows, you may be making such a bundle that it may be worth your while. [:o)]
Or put your brother or sister or lover in on the deal and then he/she can move into the second one and sell it at the appropiate time without incurring tax.
I note however that this is may be fraught with danger if you are putting someone else in the deal just to avoid tax. And, for that matter, your girl friend may well run off with the profits [
]Tony actually gave you some good advice already i.e. to go and speak to your accountant.
Pisces
Crackles,
Section 118-145 6 year rule. If you move out of your main residence you can continue to give it your exemption for CGT but you can only use the exemption on one property. The section does not specify how long you have to live there. Couples are only entitled to one residence between them. Section 118-150 allows you to exempt vacant land from CGT for up to 4 years before you live on it providing you live there for 3 months before you sell. In TD51 the ATO lists the factors it considers relevant as to whether you have set up your home there:
Elect & phone in your name
Electoral Roll
Personal Effects
Family
Mail
Length of time
Reason for occupying.
]
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