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Just to close this question off – the Accountant was wrong. The capital gains tax is worked out on a pro-rata basis calculated from the time when the 6 year rental period has elapsed.
We have received more accurate advice, and we will end up paying at most approx $5000 if we continue to rent our property for 6 months after the 6 years CGT exemption is up. If we had of continued with our current Accountant we would be paying $80K to the tax man.
My advice to everyone out there is to find a good accountant, because it could end up costing you!
According to the ATO web-site I am not liable to pay CGT on the whole 6 years, so hopefully my second opinion will confirm this. It’s time for a new accountant if this is the case!
Purchased a transportable for a beach house in SA in 1998. Some tips as follows:
The purchase price of the transportable is usually fairly competitive. The house buillders try to make their profit on changes to their standard design, installation and site works (,extra doors, pergolas, electrics, plumbing etc) Try to minimize “other” work done by house builder.
Traps if you subcontract “other” works yourself are.
If you need cut and fill for the base, the house builder will want a waiver of being responsible for any cracking or damage to the house if the foundations moves. Be sure your earthwork contractor knows what he is doing or leave it to the house supplier and pay a premium.
For “other” work, try to find one local cotractor to take care of all disciplines (eg. all electrics, plumbing etc.) otherwise you will be the meat in the sandwich between a number of different contractors. Get some competitive quotes, three max should suffice and try for a fixed price.
The house supplier will usually quote on delivered to site, placed on blocks/stumps and tied down. It is probably best to let them look after that.
Hope that helps.Note – I am seeking other expert advice (expat specialists this time), as the ATO web-site contradicts the accountants advice. In addition, I have received other advice which suggests I should keep renting the property. It certainly is not clear to me yet!
http://www.ato.gov.au/individuals/content.asp?doc=/content/57252.htm&page=24&H6_7
Thanks all for the advice
I have consulted an accountant andh it was bad news
‘That is not good news; it may pay to offer an incentive to the tenant to
leave before the 6 year period ends. The tax office will not be
lenient.Once the 6 years ends a full exemption from CGT is no longer available.
The gain will be calculated from the day the property first earned
rental income. This will be considerable given the market price
increases in Australian properties over the last 6 years.’So unfortunately it’s bribe the tenants or be whacked with a huge tax bill!
Thanks for your response Simon.
I have asked the PM to request the tenants to leave early, but the tenants are keen to stay in the property for as long as possible. We are exploring the option of contacting the tenant directly and offering an incentive for them to vacate the premises early, or offer them a month free in the house.
If the tenants were in the property for the additional 11 days, would the sum of CGT be calculated on the 11 days or would it be a fixed sum.
– Is this calculation correct
Value at start of renting period – 350,000
Value at end of renting period – 650,000
Proportion of Days over 6 year period – 11/2201 = 0.005
Capital Gains Owed = 0.005*(650,000-350,000)=$1249 owed for CGT
