Hi I was thinking of selling an investment property .Can I sell it before 12mths.I have read that I will alway pay tax on this property even if i move in for a few years than sell it.As anyone got any ideas on this.
Check with your accountant but my understanding is that if you sell it before owning it for 12 months Capital Gains Tax is paid on all the profit made. If you sell after 12 months only half of the profit is subjected to CGT that is if it is in your name.
You have to remember that the amount made when you sell whether it be half of the profit or the whole amount is added to your taxable income for the year and then taxed at that rate.
Additional to Ros's advice,
If you move in and it becomes your PPOR then the amount that you would call "taxable" is prorated of the entire time there. As it is averaged it may pay to have a valuation done prior to changing its designation.
For example:
Bought $200K
rented for 6 months still valued at $200K when changed to PPOR
Sold at 13 months, value now $400K (lets say the area boomed
)
Without a valuation, the value at time of becoming PPOR is determined as an average of increase in cost from $200K to $400K over the 13 months (ie 200K/13 = about $15K per month * 6 = about $92K
So…..the property is assumed to have increase by $92K during that first 6 months, but with a valuation prior to change, you know that the price rise occured after that and as such you would pay less tax.This can all be better understood if you call the ATO and request their CGT booklet, wherer there is a similar illustration. Please note that this is not to be taken as accounting advice and is only adlibed from the reference I suggested.
MickThanks two you both for your advice.
Jemima01Please note it is NOT the period of time that you have owned the property but the actual Contract dates which are considered for any CGT.
You could have signed the Purchase Contract on the 1st January and settled on the 30th June resold the property with a contract date of 2nd January in the following year and settled 30th January and still receive the CGT exemption of the property was considered an investment for Tax purposes.
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