Hi
I’m just about to sell one of my units that I’ve held for 3.5 years. I lived in the unit for approx 2 months, mainly so that I could qualify for the first home owners grant (had to live there within 12 months of purchase). I advised the electoral office, had my email sent there, paid electricity, moved all my belongings, even held dinner parties….[nice]
Since then, I moved back home and have rented the unit as an IP.
When I now sell this unit, do I have to pay capital gains tax?
I appreciate any advice, thanks.
Hi,
I strongly suggest you seek accounting advice on this matter, but to get the discussion started, and based on the info at the ATO Website
1. You can only have on PPoR at a time. As such, your PPoR for the 2 months you lived in the property would have been the unit. I expect that if you had of sold while you lived there then there would not have been any CGT.
2. If you have had another PPoR since that time then you will now be liable for CGT on the unit from the period that you started your PPoR elsewhere to now.
HOWEVER… (from ATO Website):
In some cases you can choose to have a particular dwelling treated as your main residence even though you cease to use it as such. This choice only needs to be made in the income year that the CGT event happens to the dwelling.If you do not use it to produce income, you can treat the dwelling as your main residence for an unlimited period after you move out of it.
If you do use it to produce income after you move out, the total period of income producing use cannot be more than 6 years for any period you are absent. This can consist of one or more smaller periods of income producing use which total up to 6 years.
3. The tricky part is, and this is where you need an accoutant, how can you mount a reasonably arguable position that the unit remained your PPoR even though you didn’t live there.
This is because there is an exemption from paying CGT on a property that remains your main resience even though you don’t live their AND rent it out (max 6 years).
In the end it will come down to your intention at the time of moving out (i.e. did you plan to really treat it as your main residence).
As you can see, this is a complicated question that requires the skills of a trained and experienced tax accountant. This post is not advice, but rather an attempt to point you in the right direction.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for your reply Steve.
Well, I haven’t declared another PPOR elsewhere since I’ve been living with my parents, so point 2 doesn’t apply to me.
I guess I’ve been a bit confused because I heard that I had to have stayed in the unit for a minimum of 6 months to be exempt from CGT.
This is the news I also heard about CGT exemption. You were also lucky with the First Home Owners Grant as they also require six months now for eligibility.
Robert Bou-Hamdan
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Comments made are of a general nature and should not be construed as individual advice.
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CrownOfGold,
Section 118-145 allows you to exempt it as your main residence for up to 6 years after you moved out as you can choose not to have your parents place considered your main residence. There is no time limit for tax purposes as to how long you have to live there but you must have moved in as soon as practical after settlement. TD51 describes what the ATO considers relevant in deciding whether you have set up your main residence. You have covered it pretty well.
Julia Hartman
[email protected]
http://www.bantacs.com.auHi Julia
TD51 of what year?
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