Hi, If a property has been a primary place of residence for 7 years then converted into an investment property and 3 years later is sold what would the Capital Gains Tax be like on that property? Would it only apply to the last 3 years appreciation (if there is any) or will still be based on the original purchase price from 10 years ago? What if there is no appreciation (maybe even a price reduction) during those 3 years as investment property, will CGT still apply? Any response will be appreciated. Thanks, Charles
Hello Seanmig
The CG on which you will be tax will be calculated by first working out the CG over the 10 years and then only charging for the percentage of time it was rented. .i.e. 3/10th of the total CG over the 10 years. You will of cause get the 50% discount.
However, if after turning your PPOR into an IP you have not declared another place as your PPOR it can even be totally CGT free.
If your not averse to a little reading the ATO site is very informative.
Here is a link to a good place to start.http://www.ato.gov.au/individuals/content.asp?doc=/content/36883.htm
Naturally you should speak to your accountant too.
Hope this helps
ElkaMany thanks Elka…
Hello seanmig
I have been reading the ATO site lately and it seems that the method I outlined above for calculating CG is true if you started renting out your PPOR before 21 August 1996.
If you started renting out your PPOR after 20 August 1996 it seems another rule applies. Here is the link to the ATO site. The first example seems to be what you are looking for.
http://www.ato.gov.au/individuals/content.asp?doc=/content/36910.htm&page=3&H3
Speaking to your accountant is always the best place to start.Sorry if I mislead you.
Elka
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