Hi All!
so.. here is my situation. Purchased a property in jan 2004. lived in it until mid 2010 at which point I rented it out for 18 months then eventually sold it. My question is around capital gains tax. ordinarily i would have assumed that CGT would have been paid on the proportion of the overall ownership period that it was rented. let's say it was 20% of the whole time of ownership it was actually rented.. so CGT would only be calculated on 20% of the total capital gain (minus the 50% CGT discount).Fine with that however the property actually would have fallen in value between the time renting started and when it was sold…. so should I be paying CGT at all if the property lost value during this period? keeping in mind that i still made a capital gain from the sale, just not during the rental period.. Should have done a valuation at the time of renting it? can get one done retrospectively?Any help would be appreciated
SilicoN
In your situation, the cost base for CGT purposes is actually the value of your property at the time it ceased being your PPOR.
Yes, you should have had a valuation done at the time the property was rented. You would need to speak to a valuer / real estate agent to see if they can do a retrospective valuation for you.
If the valuation is higher than the sale proceeds, then you have made a capital loss, which can be carried forward to offset against future capital gains.
You are not liable for CGT because you started by living in the property as opposed to renting it out. Unless you are claiming another property at your PPOR during the time you were renting out the property. Is this what you have done?
TheFinanceShop | Elite Property Finance
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Hi Silicon, Just re-read your post.
If you had another PPOR, you are liable for CGT only for the rented out portion, as I mentioned above.
If you didn't buy another property, this property can still be your PPOR, and no CGT calculations are required.
In this instance, it might be better if it was not your PPOR, as it looks like yo uwill trigger a capital loss, and you will have this loss to carry forward to offset against future capital gains.
Thanks for the replies
. Just to confirm that while the investment property was being rented out we _were_ living in another property which was our PPOR and claiming depreciation benefits on the rented property at the same time.Does this change your response at all?
Regards
Paul
SilicoN,
There is what is referred to as the 6 year rule for CGT, where if you purchased an owner occupied property, live in it and decide to rent it out, you are allowed to rent it out for up to 6 years and it will be CGT exempt. This however only applies if during the period the property is rented out, you don't have another property you claim as your PPOR.
In your case, as you had a PPOR while your initial property was being rented then you can't claim the 6 year rule, and CGT would apply as per Dan42's post.
Hi Silicon,
As you had another PPOR, my first post is correct.
I'm just looking for some help with a capital gains. I'm looking to invest in a duplex development and stand to make $200000 profit. How much capital gains tax am I looking at paying in this?
There is a possibility this will be income tax not CGT.
If it is CG then you may get the 50% discount and that figure is then added to your other taxable income and you pay tax at the marginal rate.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
so.. here is my situation. Purchased a property in jan 2004. lived in it until mid 2010 at which point I rented it out for 18 months then eventually sold it. My question is around capital gains tax. ordinarily i would have assumed that CGT would have been paid on the proportion of the overall ownership period that it was rented. let's say it was 20% of the whole time of ownership it was actually rented.. so CGT would only be calculated on 20% of the total capital gain (minus the 50% CGT discount).Fine with that however the property actually would have fallen in value between the time renting started and when it was sold…. so should I be paying CGT at all if the property lost value during this period? keeping in mind that i still made a capital gain from the sale, just not during the rental period.. Should have done a valuation at the time of renting it? can get one done retrospectively?
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