hi,
My family and I are looking to relocate out of state due to my work commitments next year and i was wondering about the capital gains tax implications. We own two properties and i was wanting to sell our PPOR and move to our newly developed vacant land (which i have just created a home on) to then claim as my PPOR. After living in on new house for a period of 6-12 months i plan to sell and relocate.
1] Can i immediately claim the new property as my PPOR( for main residence exemption) or do i need to wait a certain time period to claim main residence exemption?
2]Am i able to am i liable for CGT when i sell the new PPOR say 6-12 months later?
Details of the two properties. Our PPOR purchased for 140k worth approx 480k atm has been owned since 1992, and vacant land purchased in 1994 for 120k that has never been rented.
I dont plan to make a habit of this, after reading the forums i could not find an answer for my situation.
thanks
Hi,
There is no time limit for living in a property to be able to claim the main residence exemption. You just need to be able to demonstrate that it was your main residence.
There will be an issue for claiming the full main residence exemption on the 2nd property as you can only have 1 at a time. When you sell it you will need to do an apportionment calculation to take account of the period of time you owned the land whilst the other property was your main residence.
I recommend reading the following:
You said you are going to sell your PPOR THEN move to the new one. In that case you pay no CGT on either as you only have one at a time.
BTW you have up to 6 months overlap in case the PPOR doesn't sell straight away.When claiming the second (new land one) questions may be asked. It needs to be your "intention" for it to be your PPOR. Moving out so quickly there may be questions as to whether it was really purchased for profit, not to live in.
Hi,
The original post seems to say that the land on which the 2nd property has been constructed has been held since 1994 and there is overlap with the original main residence which has been held since 1992.The legislation is very clear that the main residence exemption can only be applied to one property at a time and that there is only a small amount of overlap that is allowable when moving from 1 to the other.
If you choose to apply the exemption to the 1st property such that it is fully exempt, then when selling the 2nd part of the gain will not qualify for the exemption and will be taxable.
As above, have a look at the ATO document that provide details on how to work this out.
I also suggest a read of the following that deals with land – which can only be exempt under the main residence after a dwelling is built (& moved into).
http://www.ato.gov.au/individuals/content.aspx?doc=/content/36890.htm
I dont think the overlap provisions would apply in this case unless the period since acquiring an interest in the second property was less than months.
s118.140
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.140.htmlTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Further consideration of the meaning of "acquire an ownership interest in a dwelling" may be required regarding the application of the overlap provisions.
It sounds like the construction of the dwelling on the 2nd property has recently been completed and this may satisfy the defenition.
Ashley,
At first glance I took it as acquiring the land. But land isn't a dwelling so you could be right. The 6 month overlap could be from the date the new place becomes a dwelling – ie possibly when occupancy certificate is issued.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
That's the way I thought it was (hence my comment). ie that it is not a PPOR if it is land as you can't reside there.
IT would look as if you would be able to increase the cost base of the land by rates, insurance, interest, etc that you have incurred since purchase assuming the alnd ahd not been used for income-producing activities
thanks for you replies.
Am i correct in saying if acquire an ownership interest in the new property within 6 months period(initial selling and moving) it will receive main residence exemption?
Do i then have 6 months to sell the new property before the exemption expires or do i just calculate via apportionment?
im confused about the apportionment calculation..Since the dwelling was never rented or there was no dwelling present. So do i just calculate from the time i move in?
For example : June 30 1994 purchase of land 140000, sell on July 1 2012(6,576 days) capital gain is 350,000, the occupancy time is 183 days from Jan 1 2012.
350,000 X 6576 – 183 / 6,576 =340,260.03
have i calculated that correctly.??
lfc2011 wrote:thanks for you replies. Am i correct in saying if acquire an ownership interest in the new property within 6 months period(initial selling and moving) it will receive main residence exemption? Do i then have 6 months to sell the new property before the exemption expires or do i just calculate via apportionment? im confused about the apportionment calculation..Since the dwelling was never rented or there was no dwelling present. So do i just calculate from the time i move in? For example : June 30 1994 purchase of land 140000, sell on July 1 2012(6,576 days) capital gain is 350,000, the occupancy time is 183 days from Jan 1 2012. 350,000 X 6576 – 183 / 6,576 =340,260.03 have i calculated that correctly.??Have a read of the legislation again.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi,
There are technical issues at play here that need resolving.
You really need an answer to the question of when you "acquire an ownership interest in a dwelling". We have suggested that this is at the time construction is completed but you really can not take that as gospel – it needs to be confirmed.
My advice – see your accountant. If you havn't got one, get one. They will be able to resolve the technical issues and guide you through the calculation. They can also advise on tips to reduce your tax bill like the good tip provided by crj.
They will also be able to provide tax planning advice that takes into account your full financial position.
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