Retrospective property valuation ?

Probably not 🙁

The valuer can’t know if your parents did a reno (for example) before or after they left the property.

My guess is that your parents are now at the mercy of the ATO 😕

Yes valuers actually can tell you what it would have been worth at any point in time.

It could also be exempt from CGT for up to 6 years.

Benny – there is no declaring of which property will be the main residence – until the sale of one of them.

Hi Parky,
Terry’s first answer might be what you need :-

Yes valuers actually can tell you what it would have been worth at any point in time.

That might be enough for you – but please don’t ignore the other option that I have brought up – it could be beneficial for your parents to work through that path. Or not – no guarantees either way.

If nominating PPOR is a choice (as it seems to be), and a choice made on sale of one of the houses and not before, there could be quite some benefit in knowing WHICH house to nominate, based on the best result for your parents. Let them pay the legal minimum amount of Tax owing, by choosing the right house to be their PPOR.

Hi Terry,

Benny – there is no declaring of which property will be the main residence – until the sale of one of them.

Wow !! THAT is good to know !!

But that brings up another related question – I want to ask it now, as (who knows) it might also help in Parky’s situation.

I believe in Qld we had to nominate a PPOR so they could calculate our Land Tax – this is a State impost, of course.

Terry, is there any tie-up between the State-based nomination (for Land Tax purposes) and the PPOR nominated for the ATO (for CGT purposes)? The reason I ask, is that I felt I needed to call ONE place my PPOR with the OSR years ago. If I later sell EITHER place I have in mind, can I nominate differently THEN without running foul of any law?

It almost seems like the State Govt wants to know which house you actually live in, while the Fed Govt’s version of “PPOR” is quite different, and the PPOR you nominate has to be a house you HAVE ONCE LIVED IN, but you don’t need to be living in it now.

So, am I right in saying we would not be lying to nominate one place for State records, and another for Federal records?

Thanks for your help Terry,

Benny

You can definitely order a retrospective property valuation for these purposes – I’ve seen it done for this exact reason a number of times. :)

Now onto working out the timing of the sale which I think could be towards the end of 2018 when rates start to rise.

Two years away??? You’re kidding aren’t you? If you mean bank rates, its already started and will accelerate much quicker in a post Trump world. My semi educated guess is 2-3% increase by end of 2018. Remember they have been called “record lows” for a reason…it ain’t normal folks and banks are used to making BIG profits….if their lending pool shrinks (and it is) you suck more out of what you’ve already got on the hook

If you mean official rates then the increase will be slightly less and slower, but recent history shows they won’t be too far behind the banks. They’ve largely stayed low for political reasons. Now that the big 4 are doing the bulldozing the RBA can chug in behind.

“No one ever lost taking a profit”

Hi Parky,

Thanks everyone for all your answers and I definitely will pass this info onto my parents. I had a bit of a read and their previous PPOR is also eligible for the ‘indexation method’ of calculating the CGT as it was purchased pre September 1999.

That is a VERY important point. I always did think that the Indexation Method was a far more fair way to calculate the CGT.

Over the last 16 years, I have seen virtually nothing of the “Indexation Rate” that used to be regularly published until the new CGT calculations in 1999 commenced. I’m sure their accountant would be a full bottle on all of that though.

And Parky, your comment reminded me of yet another possibility – this one is from so long ago, that we tend to forget. I am one of those lucky enough to have bought my home pre-CGT (we bought in early 1984) so, on sale, we pay NOTHING in the form of a CGT. If your folks are my age, they might also have bought in a pre-CGT time (was it 1985 it started? Not sure…)

Benny

Hi BB,

Most people think 4% home loan rate is normal and will stay that way,

Hmm, I dunno who THEY are !! Wouldn’t be too many on this board that think like that…..

yet not that long ago there were warnings to people borrowing at 6-7% saying factor in at least another 1-2% minimum as a buffer.

Can’t say I have heard of that one either. I DO recall (about 10 years ago) Steve warning that rates could go up to 8% and that people would be hurting (that would have been circa 2004 or so, and I had locked in a couple of loans at 6.1%). Steve had spoken in answer to some who were warning that “Rates could go back up to 17% like in the late 80’s….”

Steve basically said “No – with the mortgages so much higher today, and wages not so much higher, 8% is all it would take to cause a world of pain for many.” He pretty much called 8% as “the top” back then (at lest, that is how I interpreted it).

And, to my mind, THAT same rationale applies today – but with perhaps an even lower rate (7%?). Prices have gone even higher than in 2005 and wages have not. Interest rates thus CAN’T even get near 8% to my mind without causing a melt-down. Which Govt would sit by and watch the population implode?

To that end, a Govt SHOULD NOT sit by while costs scream up 75% in two years. There would be rioting in the streets. So many new home buyers would be being evicted for non-payment as they are borrowed to the hilt. There CAN’T be more than a 25% increase in the next two years surely !!!

But hey, what do the rest of you think? Is BB right? or me? Or is there a “somewhere in between” that makes sense? Let’s hear it….

Benny

Parky,

Do you think generally the indexation method works out to less CGT then the 50% CGT discount?

The last time I spent any time working things out like that, it was 1999, and I was trying to predict which way I might go if I needed to sell something. I don’t recall my findings from that time, but what I DO recall is that the Indexation method added just 20% of any CGT to your Income for that year to work out what Marginal Rate that took you to, and then the whole lot was taxed at THAT Marginal Rate.

e.g. If you were owing say $50k, then $10k was added to current income. If that didn’t take you into another Marginal Tax Rate, then beauty – the whole $50k was taxed at your current rate, EVEN if the addition of $50k WOULD have brought you into a higher Tax Bracket. The Indexation also played a part, as any “today’s price” was divided by the Indexed Rate to supposedly take Inflation out of any Gain you had made.

I don’t recall the actual maths around Indexation – I’m sure you would find them on the web – but it meant any gains were lower than actual buy/sell prices would indicate.

Benny

Hi Bomberboy,

Bank rates are heading north and can accelerate as quickly as they came down.

Can’t say I agree with you there. It “might” have been the case if rates went back up again soon after they dropped to the floor.

But they didn’t – and we have had YEARS (almost a decade) of borrowings at ever higher vals (in some part because rates were so low) and no Govt is going to sit idly buy and watch 20% of its population fall into a hole because the rates are climbing way too fast for the economy to keep up.

Going up – sure thing. But not SO fast….. it can’t happen – doesn’t pass the “pub test” !!

Benny