Forums / Getting Technical / Legal & Accounting / Capital Gains tax on PPOR

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  • Profile photo of reecereece
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    @johnreece
    Join Date: 2015
    Post Count: 7

    I have a newbie question. I have a property that I have bought as a PPOR and have received an excellent offer for it. I have been offered 35% more than I paid for it in July this year 2017.
    I have been told that I need to hold the property for at least 12 months from purchase date to have zero capital gains tax.
    I have looked on the ATO site and can see no provision about 12 months. It seems that as long as I have physically moved into the property and put the services (mail, electricity, gas, water etc) in my name then I can flip the house at any time. Am I missing something?

    What are the rules with selling a PPOR within 12 months?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,110

    Who told you that? They are confusing the 50% CGT discount with the main residence exemption.

    The sale of the main residence could still be exempt from CGT if sold within 12 months.

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

    Profile photo of reecereece
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    @johnreece
    Join Date: 2015
    Post Count: 7

    Hi Terryw,

    So are there no real strict time/holding rules about selling a PPOR?
    Can I buy and sell PPORs as many times as I like without having to worry about any time/holding issues?

    David Thiu
    Participant
    @david-thiu
    Join Date: 2017
    Post Count: 75

    I was under the impression that you needed to live there at least 6 months continuously and had to have proof of being a resident e.g. Bills, and that if you rented part of the house you could only claim a partial CTG exemption.

    Maybe main residence is different, but my guess is that if you do this multiple times, within a short time frame, the ATO may deem this as ‘Income Tax’ rather than ‘Capital Gains Tax’.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,110

    Hi Terryw
    So are there no real strict time/holding rules about selling a PPOR?
    Can I buy and sell PPORs as many times as I like without having to worry about any time/holding issues?

    Income tax than still apply to the profits. The main residence exemption can only apply where the property is held on capital account. Where you are buying with the intention of selling for a profit this will be on revenue account and it will be taxed as income without the 50% CGT discount or the main residence exemption if you live in it.

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

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

    Profile photo of reecereece
    Participant
    @johnreece
    Join Date: 2015
    Post Count: 7

    Hi Terryw
    So are there no real strict time/holding rules about selling a PPOR?
    Can I buy and sell PPORs as many times as I like without having to worry about any time/holding issues?

    Income tax than still apply to the profits. The main residence exemption can only apply where the property is held on capital account. Where you are buying with the intention of selling for a profit this will be on revenue account and it will be taxed as income without the 50% CGT discount or the main residence exemption if you live in it.

    ” Where you are buying with the intention of selling for a profit this will be on revenue account and it will be taxed as income…”
    Can this not be said of every property? Surely, every property is bought for the intention of a sale at some time in the future

    I have been looking through the tax rules and it seems that, as long as I live in a property as a PPOR, then there is no MINIMUM period that I need to live in it to claim the tax -free status.
    Is this correct?

    If so, can I sell my house tax free after only being in it for less than 6 months?

    • This reply was modified 1 year, 5 months ago by Profile photo of reece reece.
    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    No it can’t be said over every property. With some the plan is to invest long term and receive rents.

    Legislation doesn’t have a minimum, but the time factor would be relevant to determine if it was the main residence.

    There is no 6 month rule. One week could be sufficient in some cases.

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

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

    Profile photo of HouseofwealthHouseofwealth
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    @houseofwealth
    Join Date: 2018
    Post Count: 7

    Few things to remember as well.

    1. Property must be held by an individual. Trusts and companies dont get the main residence exemption.

    2. If used for income producing purposes it will be subject to partial CGT. Be careful if you have used it as a work office as it may be subject to partial CGT. But can use the small business concession to reduce any potential CGT.

    3. Must be less than 2 hectares or again partial CGT.

    No time limit for a property being your main residence but if it was for only week the question would be why and was it really your main residence.

    Houseofwealth | HOUSE OF WEALTH
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    Profile photo of Yngv18Yngv18
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    @yngv18
    Join Date: 2018
    Post Count: 3

    I have a slight different situation. I have an investment property in Victoria bought in 2015 and I am thinking to add my wife’s name to the title. To avoid the stamp duty, we want to claim the property back as PPOR by live in for 12 months then do the spouse name add in onto the title to make it a joint ownership of 50/50. At this point, does it trigger CGT? If we then sell the property after the name added in, what CGT implication on this? Not if my question is clear…

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,110

    Transfer of title will result in a CGT event being triggered.
    Even if there is no consideration it will be assumed you sold to wife at market value.
    Because it was an investment it is probably that tax will be payable.

    But seek specific advice

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

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

    Profile photo of Yngv18Yngv18
    Participant
    @yngv18
    Join Date: 2018
    Post Count: 3

    Adding spouse name to title for PPOR will trigger CGT? Was the regulation changed recently?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    Adding spouse name to title for PPOR will trigger CGT? Was the regulation changed recently?

    No change in laws recently.
    Transfer is a disposal which is a CGT trigger. If the main residence was a CGT exempt asset there would be no CGT. But this property was an investment property before becoming a main residence.

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

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

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