Hi y’all,
Now, I’m pretty sure we’re in the clear in regards to this issue, but I thought I’d check.
My wife (we married only last month) bought a place in Blairgowrie Vic in February 2001 for 170k… she lived in it for a little bit, then made it available for holiday rentals, with the first tenants moving in in December of that year.
In following years, she’s had it available for rent all year round, with tenants generally coming in in the school holidays.
The location happens to be close to where she has to occasionally study for 4-5 weeks at a time in her role as a paramedic, so she has lived in it periodically… and before we got hitched, we decided it would be a good thing to have our own space for a few months, so she moved down there…
The property is in her name, I have a PPOR in my name, which is now our home… we want to sell Blairgowrie to pay off our loan on our home… does the six year CGT exemption come into play?
cheers
rPS We’ve thought of selling to trusts etc, but the rental market is very weak down the coast, except for holiday periods… we’d rather pay off the PPOR and use the equity to invest in areas that aren’t as negatively geared. If we do this we’ll be able to buy $1-2 mill more of property in the next year.
I think it would apply as she lived in the house originally. Be careful because ‘couples’ are only allowed one main residence between them, since you are only just married it shoud be ok.
I remember reading a tax ruling about this topic (getting married and having 2 PPORs). You could probably find it by doing a search. From memory, you may have 6 months where you could have 2 main residences.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry,
I rang the ATO and they said it was all no worries… even though she only lived there for a month and a half or so before making it available for rent… trouble is, her accountant at the time claimed interest payments from day one (probably thinking he was doing the wife a favour), so we have to fix that up by writing a letter and paying some money back, but they reckon it’s no worries, since we can validate the fact she was living there easily enough through bills and electoral rolls etc.
I think they were actually taken aback when we rang to tell them “hey, I (wife) got too much money back on a tax return, we want to pay some back”…
Footnote to all this is just to confirm that if you get married and both of you have separate PPORS , you certainly do have only six months to dispose of one of them, if you want to keep the CGT exemption. Of course, for some people, it’s better to just turn one into an IP. I only became aware of that today through Terry, Dale Gatherum Goss and the ATO.
Cheers,
rI wonder what the situation is for marraige separations, i.e. what criteria do you have to satisfy to claim a separate PPOR each during trial or intended permanent separations.
Bruce
Mooloolaba, QldRichmond
We were in same situation, eventually turned ‘both’ into IP’s and bought another as PPOR.. his and hers investments : )
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Hi richmond,
If I understand what you’re saying, your wife initially declared to the ATO that the property was essentially an investment property (ie by claiming the interest payments as a tax deduction). But now you’re saying it’s actually her PPOR, and you’re offering to pay back the tax refunds relating to those deductions.
I’m no tax expert, but better check with your accountant whether you’re likely to cop any penalties (eg interest) on the interest payments which your wife claimed as a tax deduction. My impression of the ATO is that they take a hard line on these things, even if you’re just trying to do the right thing.
Then again, there may be a ruling or law that allows you to get the best of both worlds (although that’s inconsistent with what I know of our tax system!)
Cheers
Elysium-MHi Elysium M,
It’s more a case of an accountant thinking he was doing the right thing at the time for my wife.
My wife, and she admits this, knows bugger all about finances etc… back when she did her tax return for the first year she had the property, it was rented out for about 6 weeks… the accountant decided to claim all the interest for that year (it settled on March 2001)
So basically, about 6 weeks of interest payments were claimed that shouldn’t have been (approx $1000). I know that the ATO’s views is that SHE declared to them that it was an investment property from day one, but the accountant made the suggestion to do so, and she just went along with it, not knowing any better.. mind you, the CG on the place has been around 200k in the time she’s owned it, so we’ll happily pay any interest penalties, which will be small in comparison…
cheers
rHi richmond,
Sounds pretty good!
Wish I had a $200,000 capital gain on any of my properties!
And hey congrats on getting married! Here’s to a long and happy one! [^]
Cheers
Elysium-M
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