Hi All,
I am trying to understand the Temporary Absence rule.
For example,
I purchased a house in year 2007.
In April 2010, I purchased a 3 bedroom apartment and moved in as PPOR.After few months I rented out 1 room and occupied 2 other rooms.
From Feb 2014 – Feb 2016,
I moved out and rented out the whole apartment managed by the agent.Feb 2016,
I move back to the apartment and sell it.Can I apply 6 years Temporary Absence rule for CGT?
I ask my accountant, she said I cannot because I have more than 1 property. But I cannot find that statement in ATO site.
is that right?From what I understanding, as long as I declare one property as PPOR during that period, I get an exemption.
Thanks in advance.
You could apply the 6 year absence rule to only 1 property at any one time. But where you have lived in both properties as the main residence you could choose which property to count as the main residence for the 6 year rule. You cannot claim it for the room rentals so these will cause CGT to apply.
In your specific situation you could apply it in part. I think your accountant is wrong.
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
Hi Eric,
If you choose to treat your 3 bedroom apartment as your main residence, as you have owned the property for less then 6 years, I would have thought that there wouldn’t be any CGT issues. I haven’t found any examples of when it is partially rented, however I don’t see how this would make a difference. You can claim the 6 year exemption when its fully rented, so I don’t see how CGT issues would arise if its only partially rented. There is probably people on the forum who may be able to clarify, but its just the vibe of what I have read.
With your other house purchased in 2007, I assume that you lived in this property up until you purchased the 3 bedroom apartment, and you still own the house presently. As such you can claim this property as your main residence up until April 2010. If you will still own both properties at February 2016, it may be worthwhile comparing the increase in value of both properties from 2010 to 2016. If the house has increased more than the apartment, it may be worthwhile continuing to treat the house as your main residence rather than the apartment.
Hope this helps
Cheers
Scotty,T the 6 year rule only applies to absences. if you are living there and renting part you are not absent, so s118-145 cannot apply. s118-192 covers earning income from your property and the CGT results.
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
Thank you Terry and Scotty,
I have read some articles and I think that Terry is right. Probably I should change my accountant :( not very happy that she gave me wrong information..
Any good accountant in Sydney you could recommend?
so technically to calculate CGT in my case. Please let me know if I am wrong
Total ownership period: 6 years (year 2010 – 2016)
Temporary Absence rule applied to the period year 2014 – year 2016
During year 2010 – year 2014 I occupied 2 rooms and rent out 1 room. The tenants use 33% of the property
So there is 4 years CGTSale price: $990,000 (year 2016)
Purchase price: $590,000 (year 2010)
Cost base (valuation): $790,000 (year 2014)Initial capital gain:
Use cost base in year 2014
$790,000-$590,000= $200,000Pro-rata capital gain: $200,000 X 33% = $66,000
50% CGT discount: $33,000An apartment bought in joint name with my wife. so 50/50 when calculate tax return
It will be $16,500 as my capital gain income in that yearThe above example I did not include cost of owing and improvement
Is that right? Really appreciate if anyone can give some inputs. Thank you
Eric
I have read some articles and I think that Terry is right. Probably I should change my accountant :( not very happy that she gave me wrong information..
If anyone knows it will be Terryw . Give him a call.
Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
Hi Eric,
Terry is 100% correct.
You may choose 1 property to be your main primary residence.
This only applies when the property was rented out entirely i.e you will not be exempt for the period where you where living in the property AND rented out a room.
Cheers
____________________
James Mav – Accountant
http://www.accountancymatters.com.au
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