All Topics / Legal & Accounting / Partial CGT exemption

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  • Profile photo of carl_viccarl_vic
    Participant
    @carl_vic
    Join Date: 2005
    Post Count: 73

    My mother is renting out the upstairs area of her house, which comprises around 60% of the total area of the property. She lives in the remaining part of the house herself. She has been advised that she can claim 60% of the normal expenses which would be considered deductable if she was renting out the entire property, eg interest on loan, rates etc.

    My questions is, how does this affect the calculation of CGT payable when the property is sold? The seems to me that the logical solution would be to pay 60% of what she would normally had paid if she had rented out the entire property for the same period. Does that sound right?

    Any comments or referrals would be appreciated.

    Profile photo of crjcrj
    Participant
    @crj
    Join Date: 2004
    Post Count: 618

    More information is needed, although you are basically on the right track

    When did she acquire the property eg pre 13? Sep 85, no capital gains tax.

    Has she been using the upstairs part as PPOR at all? When did she aquire the property? When did she cease to use it all as PPOR?

    On the face of it your assumptions seem right, but there is not enough information to give a more accurate assessment

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

    I think I have read somewhere that the CGT exemption can be lost completely if the home was used for income producing purposes, whether claimed or not, no matter what percentage of the property was used.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

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

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

    Profile photo of MagellanMagellan
    Member
    @magellan
    Join Date: 2003
    Post Count: 50

    That is gonna set the cat among the pigeons ,Terry. All those claiming a proportion of interest, light, Rates etc when using a room or so in their PPof R will have to look into this. I remember that question was raised way back in the 80’s when C G first came in and as it always seemed a murky area, I never claimed any part of PP of R–as there was a lot of CG in my house that I then owned.

    Profile photo of coastymikecoastymike
    Participant
    @coastymike
    Join Date: 2005
    Post Count: 125

    Where you use your main residence for income producing purposes and have claimed a portion of rates, interest, etc. you will be entitled to a partial CGT exemption.

    CGT is calculated by total CGT multiplied by percentage of floor area not used as main residence multiplied by percentage of period of ownership, where that part of the home was not used as main residence equals taxable portion.

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

    Thanks for the good news Mike

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

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

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

    Profile photo of carl_viccarl_vic
    Participant
    @carl_vic
    Join Date: 2005
    Post Count: 73

    Thanks for your input guys. I did a lot of reading on the ATO website this morning and from what I can tell Mike is right, so it’s all good.

    By the way, the property was bought long after the 80s, probably around 95-96.

    Cheers,
    Carl

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