I was wondering if anyone could possibly help me. I bought a house 4 and a half years ago for $110000. Because of the boom it is now worth possibly $240000 and it has been my PPOR. It is now too small for my family but we would like to rent it out (CF+).
Does anyone know if we would have to pay CGT on the entire amount it has appreciated or if you can get a valuation done when we move out as a basis for any CGT payments if sold? I would not want it to continue to be my PPOR (the whole 6 year rule thing). Should I just sell it? If anyone had any advice or knowledge I would be very appreciative. I have asked various people (solicitor and accountant) and had conflicting advice – anyone out there who’s done something similar?
Thank you!
Quite straightforward and I am surprised your professionals are all over the shop advicewise.
You have 6 years CGT exemption up until you buy another PPOR. If your old one is for sale the periods can even overlap by 6 months.
So when you buy another PPOR you should get a valuation done, on the first one, to “lock in” any growth experienced. This will be valuable if the market remains flat. ie if you sell in 3 years with no further growth it would be sad to average out your PPOR period growth and pay tax on it. Hope that is clear enough…
By all means sell – but not just to avoid a possible CGT liability. I don’t feel this is a good reason and you will miss out big time if we have another boom down the track – as history tells us will be the case.
I hope this helps. Remember I am not a tax professional – but this is the advice I have been given and read many times.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[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.
Hi Jeff,
From a CGT perspective Simon is correct.
Now the critical issue that needs due consideration is what are you going to live in?
If you intend upgrading (= more expensive) your home then there is sometimes a case for selling, enjoy the no CGT status of your property and use the profits towards the purchase of a new PPOR.
In my mind there is a place for this and this primarily revolves around keeping your non-deductible debt to a minimum.
You can also then leverage of the equity of the new PPOR for other investments – this way you can have a bit both ways.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113If you do rent out the PPOR do not under any circumstance try to claim the interest on your new home against the rent from your old home.
This will not be allowed and is a common mistake that tax payers make.
The 6 year rule can be found on the ATO web site .
During the 6 years if you elect to have the first house remain as PPOR the new house will not be PPOR and is liable for CGT.
Definately get a valuation done and keep it filed away for your records.
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