Yes, you get an exemption for the period it was your PPOR, but getting the 'valuation' method' is not available to you.

Basically, you will pay CGT, when it is sold, for the period it was a rental, asa percentage of the total ownbership period.

ie, held for 5 years, PPOR for 4 years. You will pay CGT on 80% of the capital gain.

I understand that, it's just a personal example of a case where the bank wanted to CC, and we didn't. And we are $6000 better off because of it.

You would need to see a copy of the trust deed.

Firstly, Plan B is not different. It's a trust with a company as trustee. It is holding the business / investment assets.

Point one – sure, but if the money has been paid out, then the individual goes belly-up, then whats the difference? In the end, the individual is left with nothing, and the trust has paid the money out. What IS protected is any asset that the trust owns.

Sure, a trust won't protect you if a guarantee is taken by the bank. That is a given.

I disagree that the trust property is at risk if the individuals are sued, in most circumstances. If there has been some transfer of assets to the trust, for the main purpose of hiding the asset, then the trust structure probably won't work. This is the same situation as transferring an asset to the spouse to avoid creditors.

But if you are sued in the general course of business, having the investment assets separate from the personal assets will generally protect the personal assets.

Plan A – Mum and Dad hold all assets in their own name.
Mum and Dad are sued, they lose, and are ordered to pay damages to the 'winner'. All of their assets are at risk.

Plan B – Mum and Dad own PPOR, Trust owns Business
Business is sued, they lose, damages payable. Personal assets would generally be safe, as it is the company as trustee that is liable for the damages, as a separate legal entity.

There have been some examples recently of courts 'looking through' the trust, but those cases tend to be where assets are transferred for the specific purpose of hiding assets from creditors.

Do you have a reference for this? It sounds very high.

Hi Kong,

The taxable entity in this example is the trust, not the company. This is because the company is acting as trustee, rather than trading in its own right.

A trust generally does not pay income tax, because it distributes it's income to other entites / individuals. One of the benefits ofd a discretionary (family) trust is that the income is distributed at the discretion of the trustee. So the trustee can distribute income to individuals with lower incomes, providing they are allowable beneficiaries in the trust deed.

The asset is held by the trust, so the loan interest will be deductible in the trust, rather than individuals / directors.

First point, there is no minimum amount of time that you need to live in the PPOR. But you have to be able to prove it.

But yes, you are correct, the 6 years 'resets' every time you move back into the PPOR, so as long as you move back in before the 6 years is up, then rent it out again, it will be CGT free.

From s118-145 – Income Tax Assessment Act 1997

(1)  If a dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence.

             (2)  If you use the part of the dwelling that was your main residence for the purpose of producing assessable income, the maximum period that you can treat it as your main residence under this section while you use it for that purpose is 6 years. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence.

If you rented it out as soon as it settled, then it was NEVER your main residence. The 6 year rule is only if the house was your PPOR first. That's just the law. 

Don't try to rationalise tax law, you will go crazy!  

Depending on what state you are in, there may be a stamp duty cost.

Personally, I wouldn't bother. That's just my opinion, and I'm sure others will have differing opinions. My wife and I have both our PPOR and IP in joint names.