Hi everyone
Just wanting to be sure we are doing this correctly, so any advice will be helpful. We’d have asked our accountant but we are in the middle of preparing ourselves to say goodbye to her since we feel we’ve outgrown her, and don’t feel right asking her at this stage.
We have recently sold our PPoR (property A) which was rented out (for about 4 years) when we moved interstate and purchased another house (property B). In line with ATO ruling, we chose to nominate property A as PPoR since it has a much larger equity and as result we will not be up for CGT. Property B will be subject to CGT when we sell it, which is fine by us.
Two years ago, we purchased property C which is currently rented out. We are planning to knock down and rebuild property C next year. We’ll move into it and nominate it as our PPoR. Property B will then be rented out.
I received an advice recently that, ATO ruling allows us to nominate property C as our PPoR (following the sale of property A) even though it is currently rented out, providing that we construct a new property within 4 years of purchase. As a result, property C will not ever be subject to CGT when we sell it in future. Is this true? Does anyone know?
Also, in regards to land tax, we currently have nominated property B as our PPoR from land tax point of view since we are residing in the property. If we are nominating property C as PPoR from CGT point of view, are we also allowed to nominate this property as PPoR from land tax point of view? Or, PPoR from land tax point of view strictly means where we are currently residing?
Thank you for the advice!!
PS – To clarify it:
Property A – our first PPoR which is now sold
Property B – our current residential – and nominated as PPoR from land tax point of view
Property C – our planned knock down and rebuild property – future PPoR from CGT point of viewNani
Email MeThe road to success is always under construction
Hi Samson
We have recently sold our PPoR (property A) which was rented out (for about 4 years) when we moved interstate and purchased another house (property B). In line with ATO ruling, we chose to nominate property A as PPoR since it has a much larger equity and as result we will not be up for CGT. Property B will be subject to CGT when we sell it, which is fine by us.
Property A will be only partially exempt from CGT since it was rented out for 4 years. A property is only fully CGT exempt if it is your PPOR for the whole duration of your ownership.
I received an advice recently that, ATO ruling allows us to nominate property C as our PPoR (following the sale of property A) even though it is currently rented out, providing that we construct a new property within 4 years of purchase. As a result, property C will not ever be subject to CGT when we sell it in future. Is this true? Does anyone know?
This is not correct. If you rent out property C then it will be subject to CGT.
Andrew
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auGet some tax advice as this is confusing.
You will need to draw a time line and consider the overlappinng ownership periods.
You should also look at the legislation:
s118-145 the absence from main residence rule
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.145.htmls118-150 = 4 year rule on construction
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.150.htmlLook at the wording of ss3
(3) You can make the choice only if:(a) a * dwelling on the land that you construct, repair or renovate becomes your main residence (except because of section 118-147) as soon as practicable after the work is finished; and
(b) it continues to be your main residence for at least 3 months.
and ss (5)
(5) If there was already a * dwelling on the land when you * acquired your * ownership interest and you or someone else occupied it after that time, the period in subsection (2) and paragraph (4)(b) starts when the dwelling ceased to be occupied.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 Samson,
Hopefully, Terryw’s links will provide what you need to know.Re Andrew’s comment :-
Property A will be only partially exempt from CGT since it was rented out for 4 years. A property is only fully CGT exempt if it is your PPOR for the whole duration of your ownership.
…. I think Andrew might be presuming it was a renter from day one. Your words aren’t specific, but if it WAS your PPOR (i.e. you lived in it FIRST), and you kept it as your PPOR when you moved interstate , i.e. you didn’t nominate prop B as your new PPOR when you moved into it, then I believe Prop A could remain CGT exempt – even though it was rented. The rule might be that you must move back into it prior to selling to retain exemption – I don’t know – Andrew could be right after all.
As Terry said, get some tax advice.
Benny
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This reply was modified 10 years, 5 months ago by
Benny.
Hi guys
Thank you for the response.
@ Benny: yes, we lived in property A from day one and even though we moved interstate and purchased property B to live in, we continue to nominate property A as our PPoR.
@ Terry: Thanks for the links. Much appreciated. FYI – the timeline is as follow:
2002-2010 – we lived in property A – our PPoR.
2010 – moved interstate and bought property B to live in. Property A rented out but continued to be nominated as our PPoR.
2013 – bought property C – rented out.
2014 – property A sold. We are planning to nominate property C as our PPoR.
2015 – construction is due to commence on property C
2016 – hope to move in to property C!!It is quite a complex one. We’ve spoken to 2 accountants and they both have different views – Go figure! We have called ATO directly ourselves, and it seems property A can be exempt from GST since it was our PPoR and continued to be so, and it was sold within 6 years of being rented out.
Cheers!
Nani
Email MeThe road to success is always under construction
Seems straight forward to me.
What is it you are asking?
Property A could be exempt uder s118-145.
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
Land tax will depend on where the properties are located, how long the lease is and your situation.
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
It appears that you are purchasing an IP (dwelling C) and are hoping to use it as an IP for a time and then demolish and rebuild within 4 years.
Since property C is initially an IP, you will not be able to nominate this as a PPOR until you do in fact occupy it as your main residence.
The 4 year build concession deems vacant land or an uninhabited dwelling to be a main residence under certain conditions.
The 4 year build concession is where you purchase vacant land or a dwelling to build/renovate and occupy a PPOR as soon as practicable up to a limit of 4 years. Alternatively where you demolish and rebuild your existing PPOR you have up to 4 years without disturbing the main residence exemption.
You need to get further advice on the suitability of your plan.
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This reply was modified 10 years, 4 months ago by Rob G..
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This reply was modified 10 years, 5 months ago by
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