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  • Profile photo of propertyboypropertyboy
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    It appears the key is to make sure you are a tax resident of Australia when you sell. If you are as resident at the time of sale, you get all the other previous exemptions like the 6 year absence rule. Therefore, if you are outside the 6 year time period, you can still get the 6 year exemption and then be taxable on the days that exceeds it. You do not need to move back into the property to claim the residence exemption if you have previously lived there. However, moving back in does restart the 6 year absence rule again so you can get another 6 years exemption if you move out and do not have another residence that you own. Cheer, Mark

     

    Hi Mark, is there a timeframe required to settle back in the property to restart the 6 year absence rule? Would one month be sufficient.

    I am planning to move back home and look for work but not sure how many jobs are available in my home towns so may need to extend the search and potentially look interstate if I am not able to find work in my hometown. This would however mean I would need to again leave my PPR.

    Profile photo of propertyboypropertyboy
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    Profile photo of propertyboypropertyboy
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    Thanks Mark, Do I have to move back into the property or is it enough to be residing in Australia as a resident at time of sale to get the CGT exemption.

    Also, if I move back become a resident then sell but I was an expat for > 6 years, do I still get the 6 year exemption for those 6 years I was away? Am I safe to assume the 6 year rule is still in place?

    • This reply was modified 4 years, 10 months ago by Profile photo of propertyboy propertyboy.
    Profile photo of propertyboypropertyboy
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    Yeh but why are they rushing to sell? If they can move back in and then get the CGT exemption why are the articles suggesting everyone is rushing to sell? It is no different to before if they are truely expats looking to move back and become residents again – unless of course I am missing the point?

    Profile photo of propertyboypropertyboy
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    Hi propertyboy,

    Also, why is that couple making such a big deal? Why would they rush to sell it and not hold and then move back and sell unless they never planned to move back? If they were never planning on moving back they would be hit with the 6 year CGT exemption rule anyway so would then start paying CGT. Is there something I am missing in relation to why there is such outrage?

    Some of the words seem to signify GREAT change (and, in my book, rather draconian change). This quote below from the article, if true, would amount to a huge miscarriage for those expats:-

    Further, the Morrison government’s new tax bill will apply retrospectively to cover the capital gain accumulated for the entire time the property is owned.

    So, that could mean that someone buys a property in their early working life, lives in it for 15 years, then they go overseas, and sell it while away. That would mean NO PPOR benefit for those 15 years when they DID live in Australia, with that as their home. Sounds quite unfair to me. The Professor mentioned makes a similar statement – and he happens to be a “senior tax counsel at The Tax Institute” so one would think he’d have a pretty good idea of what is going on, eh? It just sounds so wrong – I hope someone in the Senate picks up on this huge injustice and forces a rewrite of the Bill for better effect. Or has it already been passed? I dunno !!! Anyone have a view? Benny PS For me, this is a huge reminder of the old saying “We just don’t know how much we don’t know” – and it is these “unknowings” that often bring us undone. This particular expat happened upon it by chance – what if he hadn’t?

    Before the rule change if they lived in the house for 15 years then moved overseas, as long as they were non resident for < 6 years, they could have sold whilst overseas and paid no CGT? Is that the key change?

    Profile photo of propertyboypropertyboy
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    I am only asking because i am an expat and want to understand if I am mising the key point.

    I am planning to move back to australia eventually like most expats do. On the basis it truely is my PPR then it souldnt be an issue as long as the 6 year exemption rule still applies. If the 6 year rule no longer applies thne that is a BIGG change. Otherwise, if it is truely a PPR you would be expected to go back live in it to sell it regardless. Even if you sold while resident and you were living in another house could the asset still be classified as a PPR?

     

    • This reply was modified 4 years, 10 months ago by Profile photo of propertyboy propertyboy.
    Profile photo of propertyboypropertyboy
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    but if you return to australia and sell and you have been away for more than 6 years do you get the 6 year exemption for that period you have been non resident?

     

    Profile photo of propertyboypropertyboy
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    https://www.domain.com.au/news/sydney-homes-of-expats-hit-the-market-to-beat-looming-cgt-deadline-928963/

    The above article says

     

    “An Australian Tax Office spokesman said home owners were able to claim the exemption if they sold the property before June 30 or returned to live in it before it was sold.”

    So if you move back in to Australia become resident and live in the property then sell it appears the  CGT exemption. Does the 6 year rule still apply?

    Also, why is that couple making such a big deal? Why would they rush to sell it and not hold and then move back and sell unless they never planned to move back? If they were never planning on moving back they would be hit with the 6 year CGT exemption rule anyway so would then start paying CGT. Is there something I am missing in relation to why there is such outrage?

    • This reply was modified 4 years, 10 months ago by Profile photo of propertyboy propertyboy.
    Profile photo of propertyboypropertyboy
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    My accountant didn’t know either…

    Anyone else got any further thoughts on the situation?

    Does the 6 year rule still apply if you return back and live in the property and become australian resident?

    Profile photo of propertyboypropertyboy
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    Hi Terry,

    Bringing this topic back given I have seen there have recently been changes for expats.

    Has the 6 year rule been abolished for expats or is this only if you sell your property whilst resident overseas.

    Here is an example situation:

    1. house purchased in October 2009

    2. Lived in it for 18 months to April 2011

    3. Rented it out for another 2 years to April 2013

    4. Then lived in it for 6 months from April 2013 to October 2013.

    5. Has now been rented ever since October 2013. been based overseas in Singapore since this time with no other PPR.

    Say move back to Australia and become resident again and move back into the property as PPR in October 2020 and then in October 2021 sell property:

    The property would have been owned at time of sale for 11 years. The 6 year exemption would have lapsed in October 2019 (Oct 2013 to Oct 2019)

    Does the 6 year exemption still apply from October 2013 to October 2019 or has this been abolished for those who were expats while away for the 6 year period?

    Would there still be entitlement to pay CGT on 1/11 years (from October 2019 when the property was moved back into as PPR in Oct 2020)?

    • This reply was modified 4 years, 11 months ago by Profile photo of propertyboy propertyboy.
    • This reply was modified 4 years, 11 months ago by Profile photo of propertyboy propertyboy.
    Profile photo of propertyboypropertyboy
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    just read the whole act.

    The rules need to be registered on title if the owners corporation has its own rules.

    Ours has not set its own rules and therefore the Model Rules seem to apply

    Schedule 1 outlines

    5 Lots

    5.1 Change of use of lots.

    5.2 External appearance of lots.

    5.3 Requiring notice to the owners corporation of renovations to lots.

    5.4 Times within which work on lots can be carried out.

    How do i know if I need to provide notice and if the other lot owners will need to vote and approve my renovation?

    Profile photo of propertyboypropertyboy
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    https://www.consumer.vic.gov.au/housing/owners-corporations/property-maintenance/maintaining-and-renovating-individual-lots

    As a lot owner in an owners corporation (formerly body corporate), you:

    are entitled to renovate or refurbish the interior of your apartment or unit. You must notify your owners corporation if the renovations require a building or planning permit
    must keep the exterior of your lot in ‘good and serviceable repair’. Its appearance must not affect other lot owners’ use and enjoyment of the property.

    Profile photo of propertyboypropertyboy
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    According to:

    https://www.propertyandlandtitles.vic.gov.au/land-titles/owners-corporations

    All owners corporations have rules for the control, management and use of common property and lots. The rules cover day-to-day issues such as safety, parking and noise.

    If an owners corporation does not make its own rules, a set of model rules which are outlined in the Owners Corporations Regulations 2007 (Schedule 2)

    Profile photo of propertyboypropertyboy
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    I have just brought up the owners corporation search included in the initial auction contract.

    It outlines:

    Limitations on Owners Corporation: Unlimited
    Rules: Model Rules apply unless a matter is provided for in owners Corporation Rules. See Section 139(3) Owners Corporation Act 2006
    Owners Corporation Rules: NIL
    Notations: NIL

    Based on the model rules provided below it appears as I am not interrupting the quiet enjoyment of the other lot owners and given I am only doing works within my demise (not touching any shared areas) I should be ok. How do I make sure I am ok before formally going ahead?

    https://www.consumer.vic.gov.au/housing/owners-corporations/rules-and-resolving-disputes/how-to-make-owners-corporation-rules

    Profile photo of propertyboypropertyboy
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    How do I check if approval is needed? Is there a specific document that governs the body corporate? I can’t find any by-law document from when I purchased the unit.

    Profile photo of propertyboypropertyboy
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    Anyone got any interesting deals worth discussing?

    Profile photo of propertyboypropertyboy
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    Profile photo of propertyboypropertyboy
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    Assuming a house qualifies as a PPOR, for each interval that it is rented out for >6, then you move back in, then rent it out for another interval >6 years, on each interval it has been rented out >6 years does the 6 year exemption apply to that interval or does it wash away completely once it has been rented out >6 years.

    Reason I ask is because:

    1. I purchased a house in October 2009

    2. Lived in it for 18 months to April 2011

    3. Rented it out for another 2 years to April 2013

    4. Then lived in it for 6 months from April 2013 to October 2013

    5. Has now been rented ever since October 2013.

    If I move back in say October 2021, and sell it, (total hold period of 12 years) is the portion that would be taxable 2/12? I can live with this but would really hope I could get the full 6 years at point 5 and hope it doesn’t wash away as I have been there for >6 years

    • This reply was modified 7 years, 2 months ago by Profile photo of propertyboy propertyboy.
    Profile photo of propertyboypropertyboy
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    I think this may be the one King referred to which is in the legislation:
    =
    Example: You live in a house for 3 years. You are posted overseas for 5 years and you rent it out during your absence. On your return you move back into it for 2 years. You are then posted overseas again for 4 years (again renting it out), at the end of which you sell the house.
    =
    Yes this main residence could get the full exemption – provided it meets the other requirements.

    What about this scenario:

    You live in a house for 3 years. You are posted overseas for 7 years and you rent it out during your absence. On your return you move back into it for 2 years. You are then posted overseas again for 4 years (again renting it out), at the end of which you sell the house.

    Total period of ownership is 16 years.

    Do you apply 1/16 in this scenario or 7/16?

    So at the point where you are away for 7 years, does the 6 years resent again after year 10 or does it no longer reset once you have been away for more than 6 years?

    Profile photo of propertyboypropertyboy
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    Here is an article I wrote a while back:
    The short answer is that you get some CGT relief as the period subject to CGT is apportioned.
    Example
    Bic Dong purchased a home in 2000 and moved in straight away. It is a small residential block and is his main residence and only property.
    On 01 Jan 2004, Bic moves out. He ends up renting a property while renting out his main residence. Mr. Dong then sells the property in 2015.
    What happens with the main residence exemption? Because Dong was absent for more than 6 years – he was away for 11 years in total.
    Bic must first work out the value of the property when it was first used to produce income which occurred on 01 Jan 2004. He can do this by employing a valuer who will estimate what it was worth back at that point in time.
    Then he must work out how long the property was rented for (in days to be exact). 2004 to 2015 is 11 years (approx.). 6 of those 11 years are able to be counted as the main residence. Therefore 6/11th of the gain will be exempt and 5/11ths will be subject to tax.
    Let’s add in some values:
    2000 $200,000 purchase price
    2004 $300,000 value at the date he moved out
    2015 $800,000
    The capital gain to work the tax out on is $800,000 – $300,000 = $500,000
    Some expense can be used to reduce this – agents fees on sale, conveyance on the sale etc, but not stamp duty on the purchase or other purchase costs because Bic is deemed to have acquired the property in 2004 at its value then (s118-192 ITAA97). Also, capital works deductions would need to be added back.
    Assuming all these amounts to $30,000 the gain would be $480,000
    Then the 50% CGT discount will be applied. $480,000 x 50% = $240,000
    Only 5/11ths of this would be taxable = $109,090
    $109,090 is the taxable gain that would be added to Bic’s other taxable income for the year. The maximum tax he would pay on this would be $53,454 but he may pay much less if his other income was very low.
    Had Bic moved back in before 01 Jan 2010 and then later moved out again, he would not have paid any CGT tax. He didn’t do this because he didn’t want the hassle of having to move.
    Had Bic decided not to keep claiming the property as his main residence after moving out (e.g. because he claimed another property) then the cost base for CGT purposes would have been the value at the time of moving out which was $300,000
    The CG would have been $800,000 – $300,000 = $500,000
    Reduce this by the selling costs of $30,000
    $480,000 gain
    $240,000 after applying the 50% CGT discount because held longer than 12 months.
    Tax would be less than $240,000 x 49% (top rate plus Medicare) = $117,600
    See
    ATO ID 2003/1113
    Income Tax
    Capital gains tax: main residence exemption – interaction between the ‘absence’ rule and the ‘first used to produce income’ rule
    ATO ID 2003/1113 – Capital gains tax: main residence exemption – interaction between the ‘absence’ rule and the ‘first used to produce income’ rule
    Section 118-192 of the Income Tax Assessment Act 1997
    INCOME TAX ASSESSMENT ACT 1997 – SECT 118.192 Special rule for first use to produce income
    Section 118-145 of the Income Tax Assessment Act 1997
    INCOME TAX ASSESSMENT ACT 1997 – SECT 118.145 Absences

    What would happen if Bic moved back in after 01 Jan 2010, say 01 Jan 2011. Does he have to apply 1/11 or 4/11 to his gin?

    That is, if you are absent for more then 6 years but move back in again, can you get benefit of a new 6 year period from the moment you move back in again?

    • This reply was modified 7 years, 2 months ago by Profile photo of propertyboy propertyboy.
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