Generally when someone buys an IP, the IP goes up in value, that person may sell the property and will have to pay CGT, they may pay 50% of this if held for 12 months or more.
Also If they have lived in there in the past 6 years then no capital gains apply.If i bought a rental property and rented it out(without initially living there) for say 8 years then moved back in so that I could get this CGT exemption, is there conditions on this exemption, like minimum time spent in house, etc. Coz i'm thinking you move in one week and claim it, but it can't be like that it seems sort of criminal.
Chris.
Hi Chris
Sounds like you have been misinformed a bit there.
If you have held a property for 12months or more you should be entitled to the 50% reduction in the capital gain. This doesn't mean 50% CGT, but the amount is halved and this is added to your income – so the max you would pay is half of the top tax rate plus medicare = 46.5% X 1/2 = 23.25%. (This is for individuals, companies would pay 30%).
Then, to get use of the 6 year rule to avoid CGT altogether, you have to live in a place before you can class it as your main residence. So any time prior to that where the property is rented out will attract CGT. Once you live in it, and then move out, you may be able to claim it as your main residence still, but you can only claim one main residence at a time – except for a 6month overlap period where you can claim 2.
The law doesn't state how long you need to live in a property to class it as your main residence. The ATO has put out a ruling or a Interpretive Decision on what they look at to determine whether a place is actually someones main residence. They look at various factors including how long a person lives there, where their mail goes, address on licence, electoral roll etc.
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 for your reply Terry,
What I said about the CGT 50% thingy was exactly what you meant but I didn't write it in very clear words.
i'll have a look to see if i can find some ruling or something with details, and the like.
Thanks,
Chris.
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