Hi
I have purchased a PPOR, and it was such a good buy that I want to live in it for 12 months, and then turn it into an Investment Property.I don’t know the ramifications of doing this. Can anyone assist please.
Jules1
JULES1
Email Memainly CGT issues.
If you move out of your main home and rent it, you can still class it as your main home and claim the interest and costs etc. And it will still be CGT if you sell within 6 years of moving out. But you can only class one residence as your main one. If you move back in after say 5 years and then move out again, the 6 year period starts again.
I think it is section 118-45 of the ITAA.
Terryw
Discover Home Loans
Mortgage Broker
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 Terryw
I thought there would be more of a problem than that to the situation. On radio shows about property or tax I have always heard that the solution to this is ‘ not to do it’. The advice is always. Stay in the home and buy a separate IP, or sell the home and buy a new home and a new IP, but never turn your home from PPOR into an IP. The advice is that it is too much of a problem tax wise to deal with.
But your response has given me hope because I intend to live in the house but later turn it into an IP.
thanks so much
cheers
Jules[biggrin]JULES1
Email MePlease just confirm your situation with your accountant. If you buy another PPOR, then you will lose the CGT exemption on the first.
Good luck
Terryw
Discover Home Loans
Mortgage Broker
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
Hi Jules1,
It is not a major tax issue.
If you are unable to claim the 6 year absence rule (i.e you are buying a PPOR elsewhere), you need to take a market valuation of your property at the date it ceased being your PPOR. This then becomes your cost base for CGT purposes.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auMark
I want to get the FHOG and Live in the property for 12 months as a PPOR (1). I then want to move to a new PPOR (2). So if PPOR1 then becomes my Investment property after I move out, the current market price when I move out will become the base price for the Investment Property and when I sell it that base price will be used for CGT calcs.
But I won’t have to pay CGT when I move out after 12 months myself because it is my PPOR1.is that right Mark???
Jules[blink]
JULES1
Email MeSpot on Jules1
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi guys… silly quetsion. What does PPOR stand for?
Also… i have only just started reading about CGT and noticed the 6 year thing. Does this mean you avoid the CGT if you own the property for a minimum of 6 years?
Thanks,
MattMatt Jones | Property Resource Shop
https://www.propertyresourceshop.com/
Email Me | Phone MeLearn What It Takes To Instantly Access All The Partners, Money, Deals and Strategies You Need, To Truly Make It In Property Investing and Leave Your Day Job Behind...
Principle Place of Residence.
The only way to avoid CGT is to make a house your PPOR. If you then move out and rent it, you can still claim it as your PPOR for up to 6 years. If you sell during this period it will be CGT free. You can only claim one PPOR (per couple), except for a period of 6 months when you may count two.
Terryw
Discover Home Loans
Mortgage Broker
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
Jules, you only need to live in the property for 6 months to not lose the FHOG benefits. You can turn it into an investment property sooner. Alternatively, you can rent it for just under 12 months and then live in it for 6 months and still not lose the FHOG benefits.
Matt, to simplify it, if you move out of your PPOR and buy another one, the 6 year exemption does not apply to the first property. It now applies to the second. The only way to get the complete benefit of the 6 year exemption is to not move into another PPOR for that period.
Robert Bou-Hamdan
Mortgage AdviserVery interesting topic. Can I give you another scenario (my own) for your opinion on? I’ve just spent the weekend digging up purchase/sale contracts and receipts relating to the cost base on what was our PPOR. We then moved and turned it into an IP. Now, three years after we moved, we’ve sold it. During this three years we’ve been renting, so didn’t have another PPOR. Does this mean our first place is still CGT exempt?
Branie
Sounds like it could be.
Terryw
Discover Home Loans
Mortgage Broker
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
I say a definitive YES.
Robert Bou-Hamdan
Mortgage AdviserWell, well, well..
I don’t know if this qualifies as an AHa moment but it’s definately a happy one!
Ans I was so smug at working out my CGT over the weekend. I’m almost disapointed..
..almost [biggrin]
Ooh Yeeesss!!!! This is a very happy moment for me reading your responses. I am sure most people would not be aware of this.
Terry & Robert great advice one again and you have just helped me reshape my strategy.
Thanks again you gurus
Jules[angel]JULES1
Email MeQuote:Originally posted by JULES1:Mark
I want to get the FHOG and Live in the property for 12 months as a PPOR (1).For FHOG you only need to reside at the property for a minimum of 6 months…
— MJ.
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