Forums / Getting Technical / Legal & Accounting / CGT and allocating PPOR riddle

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  • Profile photo of TobynTobyn
    Participant
    @planredfrog
    Join Date: 2018
    Post Count: 0

    Can anyone help set me straight?
    I need some help solving the CGT riddle (my accountants advice doesn’t seem right to me).
    In short – we bought property A in 1999 and moved out in 2003.
    We bought Property B in 2003 and moved in.
    Property A has been rented since we moved out and sold late in 2017.
    Property B has been lived in on and off since 2003 (rented while we lived overseas and interstate) and was sold in early 2018.
    I’m wanting to allocate the CGT 6 year exemption to property A since it has had the best gain but my accountant is telling me I have no choice but to allocate it to property B since I’ve lived there.
    Is this correct or can I allocate property A as PPOR for this years tax return?
    I’m now living in third property with no intention of selling anytime soon.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,304

    Hi Tobyn,
    First off, I am not an adviser, but I might be able to point you to one….. Your situation sounds a little complex, but those “in the know” can usually point us in the best direction. Perhaps one or two of them might pop in…..

    But for now, try this:-
    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/page/2/#post-5006553

    If you check out that post, and look to the “PS” area, there are two links there that talk of situations that sound a lot like your own. Have a careful read in them to see if they shine some light on your situation. For me, two big learnings in those posts (from Terryw) were these:-

    “Terry shows an example of two properties that have been lived in, thus both COULD be PPOR’s, but that the nomination of the PPOR occurs ON SALE of one of them (and not before).”

    and

    “Fed PPOR nomination and State PPOR (for Land Tax) are two separate nominations, and CAN be at odds with each other”. Wow !!

    I can’t comment further Toby, but I hope that helps you to realise that there might be a better way for you if you chase down someone who knows this stuff backwards…. (look for Terryw perhaps, or someone with similar knowledge amongst your favourite advisers).

    Benny

    Profile photo of TobynTobyn
    Participant
    @planredfrog
    Join Date: 2018
    Post Count: 0

    Thanks for all this help Benny. I think it’s starting to make some sense.
    I’ve got a clarification question which might finalize the issue for me (or not….)
    I’d be most grateful for any help.

    Reading I’ve done in other corners of the web has lead to me to the idea that the 6 year rule can somehow become a ‘factor’ that is applied to the capital gain in the same way as the 50% discount. That is to say if you have vacated for greater than 6 years,lets say 10 years and then sell, you can discount the gain by 6/10 (in this case) since the property was (is) your PPOR. Is this true?

    Refreshing on the scenario from above:

    We purchased property a in 1999 and loved there until 2003.
    We had a valuation done at the time we moved out.
    Property A has been rented since we moved out.

    We purchased property B in 2003 and have lived there over various periods since (we have lived interstate and overseas) but never bought another property.

    We sold property A in late 2017 (October).
    We sold Property B in early 2018 (March).

    My accountant insists we can not claim the 6 year exemption on property A since it’s been more than 6 years since we lived in it. My hope is that we can allocate a discount of 6 / 14 against the gain on property A and then assign the 50% CGT discount to the residual. I read a forum post (another site) that discussed how this was acceptable to the ATO (wish I could find it again!!). We would then pay the full CGT bill for property B.

    Can anyone offer any thoughts?

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,304

    Hi Toby,
    From my recollections of what others (particularly Terryw) have said, I think your accountant might not be right. But then, I am no adviser – so you must depend on others.

    Look for Terryw to pop up – and did you check out those links yet? I’m pretty sure Terry shared some really useful and “not well-known” info re CGT in those links.

    Benny

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,058

    Yes you could use the 6 year rule on property A (providing it meets the other requirements).
    But because the absence has been longer than 6 years it will not be totally CGT free. BUt a large chunk of it could be.

    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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