Have I got CGT thinking right?
Bought a PPR house lived in it 18 months got transferred (Gov Transfer), rented house ended up for 10 years 6 months moved back as PPR 3 years looking to sell.
CGT 6 year rule times out so no benefit there.
CG = difference between start if rent value (SRV) to end of rent value (ERV) CG = ERV – SRV
or CG = Sale value (Sv) – purchase value (Pv) proportional to PPR and Rental time CG = (Sv – Pv) / (14.5 / 4.5)
or some other formula
How does one get on without valuations??
How is CGT applied in such instances?
Thanks
CGT exemption should still be valid for 6 out of the 10 years.
http://www.ato.gov.au/Media-centre/Articles/Moving-on–Remember-the-six-year-rule-for-CGT/
A valuer does a valuation based on sales history from that time Ie. You purchased 200k. lived in for 18 months say it went up to 210k. you then rented it for 10 years. 6 years of that will be exempt. A Valuer will have to value from 7.5 years into the property. Say property valued at 400k at that time.
Now you have another 7.5 years of which (4.5 years is continue to rent and the last 3 are your ppor again.
Say property increased in value to 500k (from 400k) CGT can be applied as a percentage ie. 3/5ths of the time it was rented and 2/5ths was poor so you will get a excemption for 2/5 ths of the time. and the pay CGT on the remaining 3/5 which say in this example would be 60k . Plus you would of held the asset for over a year (if in personal or trust name) so entitled to 50% discount. Therefore pay tax on 30k. (at your marginal tax rate) minus and capital expenditure you have spent on the property ie additions or previous capital losses.
Thanks Wilco1
I have a better grip of its application now
wilko1 wrote:CGT exemption should still be valid for 6 out of the 10 years.http://www.ato.gov.au/Media-centre/Articles/Moving-on–Remember-the-six-year-rule-for-CGT/
A valuer does a valuation based on sales history from that time Ie. You purchased 200k. lived in for 18 months say it went up to 210k. you then rented it for 10 years. 6 years of that will be exempt. A Valuer will have to value from 7.5 years into the property. Say property valued at 400k at that time.
Now you have another 7.5 years of which (4.5 years is continue to rent and the last 3 are your ppor again.
Say property increased in value to 500k (from 400k) CGT can be applied as a percentage ie. 3/5ths of the time it was rented and 2/5ths was poor so you will get a excemption for 2/5 ths of the time. and the pay CGT on the remaining 3/5 which say in this example would be 60k . Plus you would of held the asset for over a year (if in personal or trust name) so entitled to 50% discount. Therefore pay tax on 30k. (at your marginal tax rate) minus and capital expenditure you have spent on the property ie additions or previous capital losses.
Well written
Modernity Investing
Email MeFrom your stated facts:
Valuation is at the first day it was rented for cost base
This is the day it is deemed acquired by you for the purpose of tracing ownership and apportioning
ozman when you were transferred did you buy another house at the new location ?
If you bought a second house and lived in it
you will lose the cgt exemption on the second house
for six years if you claim it on the first house during the first six years.
As you can only have one place at a time as a main residence.
Thanks members
YesDuckster,
I did buy another at about 18 months into the rental, bought a Rural Primary Production Block close to a city, I still hold this and all going well, will subdivide to rural residential blocks at a future date.
Our plan has been to buy PPRs that have good CG potential or development potential and build up a portfolio.
It will give our accountant some work but I am just trying to get a good understanding in preparation for future sale of some property.
So if P1 PPR purchase is point 0 lived in for 1.5 Y + 6 years is claimed on property 1 than that is year 7.5
Property 2 then does not become available for CGT exemption until Y7.5
Property 3 purchased at Y 8.5 could forgo (?? ) 6 year CGT exemption on P2 and apply to P3 and so on.
or option not to apply 6 year on P1 and apply to P2 or what ever most financially advantageous ??
That is why I called the post complicated CGT as I thought it would develop !
Choose the properties that would have had the most capital gain. Ie if property 1 only went up by 100k but property 2 went up by 200k it makes sense to have your exemption on property 2.
So my understanding is right Wilco1??
Will depend on which and when selling and what property. Things change again once in retirement as can tip some into Super.
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