avoiding capital gains while out of state.

Viewing 9 posts - 1 through 9 (of 9 total)

bort
Participant
@bort
Join Date: 2013
Post Count: 3
August 16, 2013 - 2:38 pm
hello there,
i am currently residing in regional wa in a mining town and plan on staying for 5 years to save enough to purchase a property back home in qld. i am scared that the market will boom while im over here, i want to buy my principal property in the next coming months so that i dont miss out on decent prices.
my questions are as follows,
1) is there a way of keeping it as my principal property without moving over in five years? (eg can i claim it as my residence if i just keep it vacant and use it on my holidays?)
2) if so how long do i have to before i can rent it out?
3) how long can i rent it out without incurring capital gains?
any clarification would be appreciated
Catalyst
Participant
@catalyst
Join Date: 2008
Post Count: 1,404
August 17, 2013 - 12:56 am
Hi.
If you move in straight away you can after that move out for a period of 6 years and rent it without paying CGT. It's commonly called the 6yr rule (look it up).
The proviso is that you don't buy another property and claim that as your principal place of residence (PPOR).
If you rent it first then move in and then back out again you can't use this rule so it's important that you move in FIRST. There is no stipulation about the time you need to stay there but enough so that it looks like your intention of the purchase was to live in it.
If you can't move in to it, it is still your PPOR (if you don't buy another PPOR) and you won't pay CGT is you don't rent it. If you do you pay CGT on the portion of time you rented it. Eg if you own it for 10 years and rent it for 5 you'll pay CGT on half the CG.
bort
Participant
@bort
Join Date: 2013
Post Count: 3
August 17, 2013 - 4:43 am
i guess ill claim it as my residence for the first year and rent it out for the next four until i come back.
thank you for clearing things up for me.
Catalyst
Participant
@catalyst
Join Date: 2008
Post Count: 1,404
August 17, 2013 - 6:20 am
You still claim it as your PPOR if you are not intending to buy another place to live in during that time. Important to make sure your accountant knows about the 6yr rule if you sell. If they are not property savvy they may not.
Scott No Mates
Participant
@scott-no-mates
Join Date: 2005
Post Count: 3,856
August 17, 2013 - 12:45 pm
Just get power/phone connected in your name (billing via email/direct debit). Then disconnect and transfer into tenant's name after a month.
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
August 18, 2013 - 1:52 am
Don't forget you must establish it as your main residence first for this to work (s118-145 ITAA97). Merely putting power on may not be enough.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
bort
Participant
@bort
Join Date: 2013
Post Count: 3
August 18, 2013 - 3:05 am
so does that mean i can originally claim residence and put power on for only one month before renting it out for six years without losing any CG when it comes time of sale?
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
August 18, 2013 - 6:03 am
bort wrote:
so does that mean i can originally claim residence and put power on for only one month before renting it out for six years without losing any CG when it comes time of sale?
No.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Scott No Mates
Participant
@scott-no-mates
Join Date: 2005
Post Count: 3,856
August 18, 2013 - 7:38 am
Also a change of address on your car licence & other bills (insurance, bank accounts/loans etc) will also help.