Could you plase advise on the latest ATO rule for capital gains tax, firstly on the time you must hold a principal place of residence, and then on the time of an investment property, before paying any CGT.
HelenMHi Helen and welcome to the forum.
This is a big area, so just to give you a quick reply…
Principal place of residence (PPOR) is CGT exempt (no time limit) – so unless it BECOMES an investment property there is no problem.
For an investment property purchased more than a year ago – the CGT is discounted by 50% of the gain at your marginal rate. For example if you bought for $100,000 two years ago and sell today for $150,000 and your marginal tax rate is 48.5% you will pay $50,000 x 50% x 48.5% = $12,125 in tax.
For an investment property held less than a year, there is no 50% discount on the capital gains tax, so it would simply be $50,000 x 48.5% = $24,250.
There is an interesting rule that may apply to your situation (not clear from your question) that says that if your PPOR becomes an IP and you don’t own another PPOR (say you rent for a while) then the IP (your old home) can be sold without any CGT within a six year period.
Hi
My question is:Are any improvements tax deductable. Lets say you spent $10,000 over a year increasing the value of the property and you sold it at $50K profit then would your taxable income be reduced to $40K?
Thanking you
Ms Elvis
[
]more info regarding CGT can be gather from
Kind regards
Chandara
[Keep going, you’re nearly reach the end of financial freedom]Me thinks you mean http://www.ato.gov.au
Ms Elvis, your conclusion is correct, but your terminolgy isn’t. Yes the $10K of improvements will be added to the capital base cost for CGT purposes and you will only be taxed on $40K.
Rod.
There is an interesting rule that may apply to your situation (not clear from your question) that says that if your PPOR becomes an IP and you don’t own another PPOR (say you rent for a while) then the IP (your old home) can be sold without any CGT within a six year period.Do you have to be overseas for the 6 year rule to apply, or can you be living in Aus?
JHi Doogs,
i think you can be living in Australia. Need to be able to provide a reasonable reason of why you are living out of your PPOR, if quizzed by the ATO.
Rau
Helen,
Taz Investor’s response was pretty comprehensive, the one thing I would add to that, is that the ATO are not silly, you can’t buy and sell a property every month and call them all PPOR. There is no hard and fast rule, as to how much you can get away with, i think it is up to someones descresion. But if you only do it once, you won’t have a problem, you could sell it as soon as you like. It is a similar situation to the first home owners grant. How long do you have to live in the house? Again, there is no fixed rule (unless they have changed it since i last read).
Dan.
If you want an extraordinary life you have to be prepared to do things that ordinary people aren’t prepared to do.
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