Hey guys,
I was just thinking about a few things with regards to converting an IP to PPOR to avoid CGT.
1. How long do you have to live in a place after having it as an IP before you can call it your PPOR?
2. If you lived there for this specified time and then sold the place claiming that it’s your PPOR, do you get a full CGT exemption? Might you get a partial exemption based on how long you rented it out versus how long you have had it as PPOR?
Simple questions I know, but im just starting out [
] If they have been answered somewhere else, please just say so and i’ll go searching.Thanks in advance!
Steveps: I’m in melb.
“Knowledge is Power”
I don’t believe there is a timeframe to establish it as a PPOR.
I you rent it then move in the CGT is proportional ie if you own it for 5 years and rented it for the first two then you will pay 40% of the CGT (halved again to 20% – 12 mth rule).
if this is your plan then consider moving in to establish it as your PPOR before you rent it. Then you get up to 6 consecutive years rental without losing the CGT exemption.
Best to get professional advice!
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks for the reply Simon.
With the second part of your response…
if this is your plan then consider moving in to establish it as your PPOR before you rent it. Then you get up to 6 consecutive years rental without losing the CGT exemption.How does this work exactly??? eg: Do you have to stay in the property as a PPOR for a certain amount of time before renting it out to get 6 years worth of CGT free rental??
Where might I go to find more CGT info?
Very much appreciated once again,
Steve“Knowledge is Power”
This is true, however after you move out and start renting the ‘new’ IP, you cannot establish a new PPOR. When you do you lose the CGT exemption from the original (PPOR now IP), and it moves to your new PPOR. This stops investors avioding CGT altogether simply by living in the place for a little while.
This will work if, for the six years, you rent a place or something. But this defeats the purpose of investing anyway…
Hope this helps…
blowieMoney is an elastic resource, it can be created. Time is not.
Not nessy-sarah-lee blowie! I’ve been considering this option myself. Although the place that I’m consdering renting is my sister’s IP. And it has a bigger back yard and all sorts of extras that my PPOR doesn’t have at the moment. I will also have a better balance sheet. No morgage payment of $850 pm and can get $200 /week rent. (new rent $75 week)
Fhog is the only thing that I can see that is a sticking point now that PPOR is an IP. Anyone got any info on this??[
]Cheers[8D]
Hi,
If you got FHOG with the purchase of your PPOR because you intended it to be your PPOR and it was for a while, then you moved out and rented yourself and converted the PPOR into an IP it is fine as far as I know. You should establish the first PPOR for at least a few months before jumping out though.
Sounds like a good plan given the rent you’ll be receiving vs what you’ll be paying – good luck!
[
]
Mel
[email protected]Wizzzard,
Which part is the nessy-sarah-lee bit??? my understanding of the CGT law or my final statement reguarding renting???
Just want to make super-sure I have my facts straight….
cheers
blowieMoney is an elastic resource, it can be created. Time is not.
Sorry Blowie, me and my clear as mud comments!![:0)]
I was referring to your remark about renting. Why live in a place that may end up +ve CF, as well as not needing to pay the mortgage. This alone is better for your income, then combined with cheap rent and the feel good factor of helping out seems like the most obvious for a win-win situation.
Oh yeah thanks Mel[
] I always find it handy to know I’m not totally off track!!!
] If they have been answered somewhere else, please just say so and i’ll go searching.
]
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