Hello All,
I am thinking about selling my IP as basically I would like to use the gains to pay off some of my debt on my PPOR, also I can’t see the Canberra market moving much in the next few years and the property is currently not doing much for me.
My question is, that when this property stopped being my PPOR and became my IP, I had it valued by the bank to access some equity. I read in API from October last year that if you sell a place that was originally your PPOR but later became an IP you would only have to pay CGT on the amount it has increased in value since it became your IP. In this case, my property has not increased at all since becoming an IP, based on the bank’s valuation. Would this valuation be enough to use to determine my CG liability or will I have to have a valuation done that would estimate the value of the property back then?
Hope this all makes sense. Everyone’s help would be greatly appreciated.
Thanks,
LuckyoneLuckyone,
You will be exempt from CGT for the period of time in which it was your PPOR, and (now here is the really really good news….) IF it has been an IP for <6 years AND provided you did not claim another property as your PPOR in the meantime, you will still be CGT exempt.
However, if this is not the case, then the cost base calculation would be from the time you moved out (the value at that time). It is not a matter of how much it has or hasn’t gone up during the time it was an IP, it is more about how much you sell it for. For example, if it was worth 200K when you moved out, and you sell it for 200K then you’re fine, but if it sells for 220K then you will be liable for CGT on 10K (using 50% discount on the 20K profit as you obviously owned it for longer than 12 months).
Hope this helps.
Cheers,
Jo
Thanks for that Jo. So to determine the value of the property at the time I moved out, will the bank valuation be enough for that?
Thanks,
LuckyoneNot really sure luckyone, it may well be. Don’t forget banks tend to give very conservative valuations, hence it may have been worth more at the time.
Check with the ATO if this valuation is sufficient, otherwise you may need to get an independent property valuation from someone who can backdate it to the time you moved out (preferably a valuer who deals specifically with CGT valuations as they are used this sort of thing).
Give the ATO a call to start with on 13 28 61 and ask for the CGT division.
Good luck,
Jo
Thanks for all your help Jo. I will give the ATO a call and see what they say.
Thanks,
LuckyoneYou will only have to prove it if you are audited – which would be rare.
However, it is best to plan for these things. Having a bank valuation, one done by a licenced valuer, probably should be enough. Do you have an actual copy of the valuation?
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
My tax accountant says the valuation should be sufficient, if it was done by a licenced valuer. I am not a tax adviser though. You should obtain your own tax advice before acting on anything you read on this forum.
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