Viewing 20 posts - 21 through 40 (of 50 total)
  • Profile photo of TerrywTerryw
    Participant
    @terryw
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    if not audited then no problem. If audited you would need evidence you lived there.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of propertyboypropertyboy
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    @propertyboy
    Join Date: 2008
    Post Count: 232

    But is water, electricty and internet in my name enough to prove I was living there?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    Does the electricity and water show any usage?
    What about photos?
    drivers licence?
    electoral roll
    internet connection
    mobile phone bill showing location
    Evidence in the form of affidavits or stat decs if need be by other family members, neighbours etc.
    It will come down to how thorough the audit is.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of propertyboypropertyboy
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    @propertyboy
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    The water, gas and electricity show usage but I always had my mail sent to a PO Box. THe bills were in my name and I paid for the usage however.

    • This reply was modified 2 years, 9 months ago by Profile photo of propertyboy propertyboy.
    Profile photo of propertyboypropertyboy
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    @propertyboy
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    Here is an article I wrote a while back:
    The short answer is that you get some CGT relief as the period subject to CGT is apportioned.
    Example
    Bic Dong purchased a home in 2000 and moved in straight away. It is a small residential block and is his main residence and only property.
    On 01 Jan 2004, Bic moves out. He ends up renting a property while renting out his main residence. Mr. Dong then sells the property in 2015.
    What happens with the main residence exemption? Because Dong was absent for more than 6 years – he was away for 11 years in total.
    Bic must first work out the value of the property when it was first used to produce income which occurred on 01 Jan 2004. He can do this by employing a valuer who will estimate what it was worth back at that point in time.
    Then he must work out how long the property was rented for (in days to be exact). 2004 to 2015 is 11 years (approx.). 6 of those 11 years are able to be counted as the main residence. Therefore 6/11th of the gain will be exempt and 5/11ths will be subject to tax.
    Let’s add in some values:
    2000 $200,000 purchase price
    2004 $300,000 value at the date he moved out
    2015 $800,000
    The capital gain to work the tax out on is $800,000 – $300,000 = $500,000
    Some expense can be used to reduce this – agents fees on sale, conveyance on the sale etc, but not stamp duty on the purchase or other purchase costs because Bic is deemed to have acquired the property in 2004 at its value then (s118-192 ITAA97). Also, capital works deductions would need to be added back.
    Assuming all these amounts to $30,000 the gain would be $480,000
    Then the 50% CGT discount will be applied. $480,000 x 50% = $240,000
    Only 5/11ths of this would be taxable = $109,090
    $109,090 is the taxable gain that would be added to Bic’s other taxable income for the year. The maximum tax he would pay on this would be $53,454 but he may pay much less if his other income was very low.
    Had Bic moved back in before 01 Jan 2010 and then later moved out again, he would not have paid any CGT tax. He didn’t do this because he didn’t want the hassle of having to move.
    Had Bic decided not to keep claiming the property as his main residence after moving out (e.g. because he claimed another property) then the cost base for CGT purposes would have been the value at the time of moving out which was $300,000
    The CG would have been $800,000 – $300,000 = $500,000
    Reduce this by the selling costs of $30,000
    $480,000 gain
    $240,000 after applying the 50% CGT discount because held longer than 12 months.
    Tax would be less than $240,000 x 49% (top rate plus Medicare) = $117,600
    See
    ATO ID 2003/1113
    Income Tax
    Capital gains tax: main residence exemption – interaction between the ‘absence’ rule and the ‘first used to produce income’ rule
    ATO ID 2003/1113 – Capital gains tax: main residence exemption – interaction between the ‘absence’ rule and the ‘first used to produce income’ rule
    Section 118-192 of the Income Tax Assessment Act 1997
    INCOME TAX ASSESSMENT ACT 1997 – SECT 118.192 Special rule for first use to produce income
    Section 118-145 of the Income Tax Assessment Act 1997
    INCOME TAX ASSESSMENT ACT 1997 – SECT 118.145 Absences

    What would happen if Bic moved back in after 01 Jan 2010, say 01 Jan 2011. Does he have to apply 1/11 or 4/11 to his gin?

    That is, if you are absent for more then 6 years but move back in again, can you get benefit of a new 6 year period from the moment you move back in again?

    • This reply was modified 2 years, 9 months ago by Profile photo of propertyboy propertyboy.
    Profile photo of propertyboypropertyboy
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    @propertyboy
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    I think this may be the one King referred to which is in the legislation:
    =
    Example: You live in a house for 3 years. You are posted overseas for 5 years and you rent it out during your absence. On your return you move back into it for 2 years. You are then posted overseas again for 4 years (again renting it out), at the end of which you sell the house.
    =
    Yes this main residence could get the full exemption – provided it meets the other requirements.

    What about this scenario:

    You live in a house for 3 years. You are posted overseas for 7 years and you rent it out during your absence. On your return you move back into it for 2 years. You are then posted overseas again for 4 years (again renting it out), at the end of which you sell the house.

    Total period of ownership is 16 years.

    Do you apply 1/16 in this scenario or 7/16?

    So at the point where you are away for 7 years, does the 6 years resent again after year 10 or does it no longer reset once you have been away for more than 6 years?

    Profile photo of TerrywTerryw
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    @terryw
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    The period it wasn’t the main residence appears to be 1 year so 1/16

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of propertyboypropertyboy
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    @propertyboy
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    Assuming a house qualifies as a PPOR, for each interval that it is rented out for >6, then you move back in, then rent it out for another interval >6 years, on each interval it has been rented out >6 years does the 6 year exemption apply to that interval or does it wash away completely once it has been rented out >6 years.

    Reason I ask is because:

    1. I purchased a house in October 2009

    2. Lived in it for 18 months to April 2011

    3. Rented it out for another 2 years to April 2013

    4. Then lived in it for 6 months from April 2013 to October 2013

    5. Has now been rented ever since October 2013.

    If I move back in say October 2021, and sell it, (total hold period of 12 years) is the portion that would be taxable 2/12? I can live with this but would really hope I could get the full 6 years at point 5 and hope it doesn’t wash away as I have been there for >6 years

    • This reply was modified 2 years, 9 months ago by Profile photo of propertyboy propertyboy.
    Profile photo of TerrywTerryw
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    @terryw
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    How many years was it not the main residence? Sounds like 2 years so 2/12ths.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of propertyboypropertyboy
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    @propertyboy
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    Hi Terry,

    Bringing this topic back given I have seen there have recently been changes for expats.

    Has the 6 year rule been abolished for expats or is this only if you sell your property whilst resident overseas.

    Here is an example situation:

    1. house purchased in October 2009

    2. Lived in it for 18 months to April 2011

    3. Rented it out for another 2 years to April 2013

    4. Then lived in it for 6 months from April 2013 to October 2013.

    5. Has now been rented ever since October 2013. been based overseas in Singapore since this time with no other PPR.

    Say move back to Australia and become resident again and move back into the property as PPR in October 2020 and then in October 2021 sell property:

    The property would have been owned at time of sale for 11 years. The 6 year exemption would have lapsed in October 2019 (Oct 2013 to Oct 2019)

    Does the 6 year exemption still apply from October 2013 to October 2019 or has this been abolished for those who were expats while away for the 6 year period?

    Would there still be entitlement to pay CGT on 1/11 years (from October 2019 when the property was moved back into as PPR in Oct 2020)?

    • This reply was modified 6 months ago by Profile photo of propertyboy propertyboy.
    • This reply was modified 6 months ago by Profile photo of propertyboy propertyboy.
    Profile photo of TerrywTerryw
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    @terryw
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    i haven’t examined the recent changes. But I think the 6 year rule might still be able to be used if the property is sold when the taxpayer is a resident again.

     

    seek tax advice.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of propertyboypropertyboy
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    @propertyboy
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    My accountant didn’t know either…

    Anyone else got any further thoughts on the situation?

    Does the 6 year rule still apply if you return back and live in the property and become australian resident?

    Profile photo of TerrywTerryw
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    @terryw
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    The legislation still has an example involving someone moving overseas

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of propertyboypropertyboy
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    https://www.domain.com.au/news/sydney-homes-of-expats-hit-the-market-to-beat-looming-cgt-deadline-928963/

    The above article says

     

    “An Australian Tax Office spokesman said home owners were able to claim the exemption if they sold the property before June 30 or returned to live in it before it was sold.”

    So if you move back in to Australia become resident and live in the property then sell it appears the  CGT exemption. Does the 6 year rule still apply?

    Also, why is that couple making such a big deal? Why would they rush to sell it and not hold and then move back and sell unless they never planned to move back? If they were never planning on moving back they would be hit with the 6 year CGT exemption rule anyway so would then start paying CGT. Is there something I am missing in relation to why there is such outrage?

    • This reply was modified 4 months, 3 weeks ago by Profile photo of propertyboy propertyboy.
    Profile photo of TerrywTerryw
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    I still haven’t read the legislation but believe the risk is having to sell while being overseas – then there is no exemption, no 50% CGT discount and potentially huge capital gains tax as a result. I know there are some small concessions for dying overseas – but not much of a concession.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of propertyboypropertyboy
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    @propertyboy
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    but if you return to australia and sell and you have been away for more than 6 years do you get the 6 year exemption for that period you have been non resident?

     

    Profile photo of BennyBenny
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    @benny
    Join Date: 2002
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    Hi propertyboy,

    Also, why is that couple making such a big deal? Why would they rush to sell it and not hold and then move back and sell unless they never planned to move back? If they were never planning on moving back they would be hit with the 6 year CGT exemption rule anyway so would then start paying CGT. Is there something I am missing in relation to why there is such outrage?

    Some of the words seem to signify GREAT change (and, in my book, rather draconian change).  This quote below from the article, if true, would amount to a huge miscarriage for those expats:-

    Further, the Morrison government’s new tax bill will apply retrospectively to cover the capital gain accumulated for the entire time the property is owned.

    So, that could mean that someone buys a property in their early working life, lives in it for 15 years, then they go overseas, and sell it while away.  That would mean NO PPOR benefit for those 15 years when they DID live in Australia, with that as their home.  Sounds quite unfair to me.

    The Professor mentioned makes a similar statement – and he happens to be a “senior tax counsel at The Tax Institute” so one would think he’d have a pretty good idea of what is going on, eh?  It just sounds so wrong – I hope someone in the Senate picks up on this huge injustice and forces a rewrite of the Bill for better effect.   Or has it already been passed?   I dunno !!!  Anyone have a view?

    Benny

    PS  For me, this is a huge reminder of the old saying “We just don’t know how much we don’t know” – and it is these “unknowings” that often bring us undone.   This particular expat happened upon it by chance – what if he hadn’t?

    Profile photo of propertyboypropertyboy
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    @propertyboy
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    I am only asking because i am an expat and want to understand if I am mising the key point.

    I am planning to move back to australia eventually like most expats do. On the basis it truely is my PPR then it souldnt be an issue as long as the 6 year exemption rule still applies. If the 6 year rule no longer applies thne that is a BIGG change. Otherwise, if it is truely a PPR you would be expected to go back live in it to sell it regardless. Even if you sold while resident and you were living in another house could the asset still be classified as a PPR?

     

    • This reply was modified 4 months, 3 weeks ago by Profile photo of propertyboy propertyboy.
    Profile photo of propertyboypropertyboy
    Participant
    @propertyboy
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    Hi propertyboy,

    Also, why is that couple making such a big deal? Why would they rush to sell it and not hold and then move back and sell unless they never planned to move back? If they were never planning on moving back they would be hit with the 6 year CGT exemption rule anyway so would then start paying CGT. Is there something I am missing in relation to why there is such outrage?

    Some of the words seem to signify GREAT change (and, in my book, rather draconian change). This quote below from the article, if true, would amount to a huge miscarriage for those expats:-

    Further, the Morrison government’s new tax bill will apply retrospectively to cover the capital gain accumulated for the entire time the property is owned.

    So, that could mean that someone buys a property in their early working life, lives in it for 15 years, then they go overseas, and sell it while away. That would mean NO PPOR benefit for those 15 years when they DID live in Australia, with that as their home. Sounds quite unfair to me. The Professor mentioned makes a similar statement – and he happens to be a “senior tax counsel at The Tax Institute” so one would think he’d have a pretty good idea of what is going on, eh? It just sounds so wrong – I hope someone in the Senate picks up on this huge injustice and forces a rewrite of the Bill for better effect. Or has it already been passed? I dunno !!! Anyone have a view? Benny PS For me, this is a huge reminder of the old saying “We just don’t know how much we don’t know” – and it is these “unknowings” that often bring us undone. This particular expat happened upon it by chance – what if he hadn’t?

    Before the rule change if they lived in the house for 15 years then moved overseas, as long as they were non resident for < 6 years, they could have sold whilst overseas and paid no CGT? Is that the key change?

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi propertyboy,

    Before the rule change if they lived in the house for 15 years then moved overseas, as long as they were non resident for < 6 years, they could have sold whilst overseas and paid no CGT? Is that the key change?

    I think it is far worse than that.  Note I am NOT an adviser in this – so my opinion only – as I recall, previously they could sell even after 6 years, and all the ATO would base the CGT on was for the time it was a rental.  So, sell before 6 years is up, get full CGT exemption (with conditions perhaps? maybe they had to move back in – not sure) or sell after 6 years was up, and they’d be taxed on the total years it was rented, divided by the total years it was owned.   As a quick example, if they lived in it for 16 years then rented it, and sold it 8 years after moving out, then CGT was on 8/24 of the gain (or 1/3rd of the gain in value).

    This new legislation (according to the article) seems to be wanting to base CGT on the gain in value over the full 24 years of ownership (even though 16 of them were as their PPOR).  THAT to me is the big change – and (to me) wrong !!

    Benny

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