In Mar 04, we bought a house in Adelaide which we lived in til Mar 05, after which we moved to NSW for work. We rented the house out, and rented a house while in NSW. We then bought a house in NSW in Mar 06, which became our new PPOR.
We've decided to sell the Adelaide IP, but are unsure how to apply the PPOR CGT exemption. Would the CGT exemption apply up to the date we lived in it (ie. we'd need to get a valuation for Mar 05), or the date we purchased the new home (Mar 06)?
From pretty much the time we moved to NSW, we were on the NSW electoral roll, had all mail etc go to NSW, NSW drivers licence etc. Would the ATO likely consider our Adelaide place no longer our PPOR as soon as we moved out, or are you permitted to casually elect which house is PPOR?
Hi
As a guide there are 2 ways
one is valuation at date of change of use – must be realistic, then if it has increased since then any gain will be taxable – if you can prove that it was an IP for over 12 months then only 50% of gain is taxable at your marginal rate.
second is to get the gain from original purchase to final sale and apportinate the gain on a percentage of time as PPOR vs IP. Again if time as IP is greater than 12 months then 50% CGT discount applies. Timing could be an issue – is there a better financial year to do it from on overall tax perspective.
Of course this doesn't subsitute paying for professional tax advice – should also consider what strategies you have to remove extra tax payable eg: super contribution or something like that.
No decision should be made on its own – watch the collateral affect on the rest of your financial situation.
Hope this helps.
Hello b0son
You seriously need to see a good accountant as this could save you a lot of money.
My understanding of the possibilities is a little different.
The house in Adelaide remained your PPOR until March 06 when you bought a new house in NSW. Under the 6 year rule it remained CGT free even though it was being used as an IP for a year.
From there you actually have a choice.
You can continue to treat your Adelaide property as your PPOR and because the total time it's been rented out does not exceed 6 years, it will be CGT free when you sell.
Naturally this has implications for your home in NSW as it's not possible to claim 2 PPORs.
Your NSW home will have a CGT liability ( if you sell it ) from March 06 to the date you sell your Adelaide property.One of the things you need to look at is which property has experience the most gain between March 06 and now.
However not declaring your NSW home as your PPOR from the beginning may impact your ability to use the 6 year rule later if you decide to move again and want to use the NSW property as an IP. Check this with the accountant.
" if you can prove that it was an IP for over 12 months then only 50% of gain is taxable at your marginal rate."
BTW Sorry I may be wrong but I don't think getting the 50% discount on CG is dependent on it being an IP for over 12 months but you owning it for over 12 months.Hope this helps
Elka
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