My mother is renting out the upstairs area of her house, which comprises around 60% of the total area of the property. She lives in the remaining part of the house herself. She has been advised that she can claim 60% of the normal expenses which would be considered deductable if she was renting out the entire property, eg interest on loan, rates etc.
My questions is, how does this affect the calculation of CGT payable when the property is sold? The seems to me that the logical solution would be to pay 60% of what she would normally had paid if she had rented out the entire property for the same period. Does that sound right?
Any comments or referrals would be appreciated.
More information is needed, although you are basically on the right track
When did she acquire the property eg pre 13? Sep 85, no capital gains tax.
Has she been using the upstairs part as PPOR at all? When did she aquire the property? When did she cease to use it all as PPOR?
On the face of it your assumptions seem right, but there is not enough information to give a more accurate assessment
I think I have read somewhere that the CGT exemption can be lost completely if the home was used for income producing purposes, whether claimed or not, no matter what percentage of the property was used.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
That is gonna set the cat among the pigeons ,Terry. All those claiming a proportion of interest, light, Rates etc when using a room or so in their PPof R will have to look into this. I remember that question was raised way back in the 80’s when C G first came in and as it always seemed a murky area, I never claimed any part of PP of R–as there was a lot of CG in my house that I then owned.
Where you use your main residence for income producing purposes and have claimed a portion of rates, interest, etc. you will be entitled to a partial CGT exemption.
CGT is calculated by total CGT multiplied by percentage of floor area not used as main residence multiplied by percentage of period of ownership, where that part of the home was not used as main residence equals taxable portion.
Thanks for the good news Mike
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for your input guys. I did a lot of reading on the ATO website this morning and from what I can tell Mike is right, so it’s all good.
By the way, the property was bought long after the 80s, probably around 95-96.
Cheers,
Carl
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