All Topics / General Property / Capital Gains Tax

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  • Profile photo of nurse1nurse1
    Participant
    @nurse1
    Join Date: 2010
    Post Count: 21

    We paid off our PPOR in Reservoir in 2019 (bought in 2000) and moved out in Feb last year with a mortgage on our current PPOR in Seaford

    We have a tenant in our Reservoir property and so it is now an IP. We plan to eventually sell it and if the market is good, we can pay off the current loan for PPOR in Seaford with some money left over.

    Any ideas on how to reduce CGT e.g Should we move back into Reservoir before selling and make current PPOR an IP? Then down the track, if we happened to sell Seaford that would then be up for CGT? from when we bought if or after tenants move in or other ?

    I appreciate any advice

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    You could eliminate CGT by claiming the main residence exemption, potentially.

    Or use the cost base reset to market value at first rented rule and see how much CGT would be payable. It might be nil or very low.

    Moving back in won’t help.

     

    Get some specific tax advice.

     

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of nurse1nurse1
    Participant
    @nurse1
    Join Date: 2010
    Post Count: 21

    Thank you, Terry. I will get tax advice as it is confusing Below is what I viewed on the ATO site:

     

    To be eligible for the main residence exemption, the following conditions must be satisfied:

    the taxpayer is an individual
    the taxpayer is an Australian tax resident
    the dwelling was the taxpayer’s main residence throughout the ‘ownership period‘, and
    the dwelling was not transferred to the taxpayer as a beneficiary in, or as the trustee of, a deceased estate.

    Reservoir property is not our main residence as we now live in the house we bought in Seaford 

    Below is also from ATO site

    Where the dwelling is used to produce assessable income when the taxpayer is absent (for example, is rented out), the exemption will apply for a period of up to six years. If the dwelling is re-established as the taxpayer’s main residence, another maximum period of six years applies if the dwelling is again vacated. The taxpayer can only continue to apply the main residence exemption to the vacated property where no other dwelling is treated as a main residence during the period of absence.

     

    So from what I have read, I can rent it out up to 6 yrs then need to move back in to reestablish reservoir as the main residence and remove Seaford as main residence as can only have 1

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    you can only claim one main residence for the exemption for any overlapping period of time. Which one you choose is important because the other will then be exposed.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of nurse1nurse1
    Participant
    @nurse1
    Join Date: 2010
    Post Count: 21

    So choose 1 before selling? Don’t intend to sell for at least 5 yrs Reservoir would be the one to choose as it has gone up in price by 400-500% and anticipate more in  5 yrs unless some economic down turn Our new PPOR is possibly similar price to when we bought it 1 yr ago

    As we didn’t get a market appraisal when we started renting out our previous PPOR last year, is it too late?
    Thanks for your info and will get tax advice Duden the track

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Sorry, I can’t follow so best thing for you would be to get some proper advice

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

Viewing 6 posts - 1 through 6 (of 6 total)

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