We've recently moved interstate and out of our PPOR, which is now tenanted. We are considering selling the property to re-invest. Does anyone know if we will incur CGT for the sale of this property now that is is considered an investment. It will have been 12 months in the next couple of weeks.
Any comments appreciated.
hi sumnerstephen,
there’s a couple of pertinent issues.
I have to ask though… when you say “it will have been 12 months in the next couple of weeks” do you mean since you bought the property?
Firstly, provided you satisfy the critera for PPOR exemption, you can extend the main residence exemption for up to six years after you move out. You can even do this if you move into another house which you own, but you would loose the PPOR on the new house, for that period.
check this out:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htmSecondly, If you chose not to extend the main residence exemption, then provided that you moved into the house as soon as practically possible after you bought it, (and a few other things) the “home first used to produce income rule” would allow you to use the market value of the property at the time you moved out as the cost base for your capital gain tax – so you would not pay CGT on the appreciation in value whilst you lived there. (make sure your accountant does not do a pro-rata calculation!!!)
more info here:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36910.htm&page=3&H3sumnerstephen wrote:We've recently moved interstate and out of our PPOR, which is now tenanted. We are considering selling the property to re-invest. Does anyone know if we will incur CGT for the sale of this property now that is is considered an investment. It will have been 12 months in the next couple of weeks.Any comments appreciated.
Are you currently renting interstate, or have you bought to live in? If you have rented, then you should be able to sell CGT free, assuming;-
1) You lived in your PPOR straight after settlement, and before you rented it.
2) It has been less than 6 years since you moved out and rented it out.
3) You are not claiming the PPOR exemption for another house (ie, you are renting interstate.Mr5o1 wrote:Secondly, If you chose not to extend the main residence exemption, then provided that you moved into the house as soon as practically possible after you bought it, (and a few other things) the "home first used to produce income rule" would allow you to use the market value of the property at the time you moved out as the cost base for your capital gain tax – so you would not pay CGT on the appreciation in value whilst you lived there. (make sure your accountant does not do a pro-rata calculation!!!)
more info here: http://www.ato.gov.au/individuals/content.asp?doc=/content/36910.htm&page=3&H3If you have to pay CGT (say you bought interstate), make sure your accountant does BOTH calculations and chooses the best one. Sometimes the pro-rata calculation gives a better result. (If the house has had a sharp increase in recent years, for example).
Thanks. Very helpful indeed. To answer your question BTW, what I meant by the 12 months statement was that we would have been out of the property for 12 months within the coming weeks.
Those links have shed a bit more light on this for me. Thank you
Stephen
Dan42 wrote:If you have to pay CGT (say you bought interstate), make sure your accountant does BOTH calculations and chooses the best one. Sometimes the pro-rata calculation gives a better result. (If the house has had a sharp increase in recent years, for example).Sorry dan.. A pro rata calculation is not available in this case. if you fit the criteria for a “home first used to produce income rule” case, then you do not have a choice, market value at the time the property was first used to produce income MUST be used as the cost base. Its something I’ve argued with the tax office about in the past, and its mentioned in that link I gave… last sentence, first paragraph after the dot points.
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