I understand that I can transfer my PPOR status from a dwelling to a vacant block of land for up to 4 years prior to the new PPOR being constructed. Upon construction you need to move in as soon as practically possible.
The situation is:
PPOR purchased in 2000 and sold in July 2004. Block A – block of land purchased July 2003, house constructed and moved in Feb 2004, currently under contract. Block B – 2nd block of land purchased Sept 2004, new dwelling now completed but not yet recieved final occupancy, will move in ASAP. Lived in Block A, not leased.My questions are:
1. What determines "as practical as possible"? (ie final occupancy certificate etc).
2. If PPOR dwelling is sold and the PPOR status is transferred to the block of land, can you live in another property that you own but not consider it as you PPOR, or do you have to declare a "market rent". (Obviously I havent paid rent as such, merely paid the interest repayments as required).
3. If you are able to do the above, does that mean when you sell the dwelling not designated PPOR, you are eligble for a CGT event (either a profit or a loss)?
4. Do I HAVE to call Block A my PPOR?
I know I need to see the accountant and will do so. I am just trying to get my thoughts somewhat clearer because we all know time is money and if I am not clear well………..
Thank you for any opinions.
Mick
Hint – A vacant block of land is not a ppor. You can only reside in one PPOR at any one time (although there is some allowance for moving in/selling previous ppor)
Hi Scott,
http://law.ato.gov.au/atolaw/view.htm?docid=PAC/19970038/118-150
States I can claim a vacant block of land as PPOR for up to 4 years prior to the dwelling being built so long as I move in and stay for at least 3 months after. What I cant find is the ramifications of living in another dwelling that I also own during the construction time. Is this building considered an IP and as such can be depreciated etc even though there was no "rental income" (obviously loan repayments were met)?.
Mick
If you live in your other owned premises, then this is your PPOR (ie you own it, you are living in it) – that is why you cannot find anything written to the contrary. Rent out your house, and rent elsewhere – that way you can still claim your land as your ppor & the house as an IP.
By calling your land your PPOR, then you may be subjecting your other house to become liable for land tax annually and CGT upon sale.
Precisely my point. I would prefer to call the land cum construction the PPOR as it has shown the greatest capital growth. As such, I am understanding that I must declare the current house for the purposes of CGT (never intended to try and claim two at once). Just trying to clarify things prior to going to the accountant. What my biggest question would be given the above, are the expenses of the property that would be subject to the CGT event deductible if I am living in it (I know they are if it is rented, but what if it is not rented)??
Cheers
MickIf there is no income, then there are no deductibles – that is why I suggest turning it into an IP and rent elsewhere (at a lower price or better premises) so that you are getting a return and are able to claim all expenses.
Alternatively, just get the land revalued (by a valuer) once construction is complete so that you have your initial purchase cost, development cost and market val all to establish what the house is worth when you move in and then in the event of a sale you can argue that cgt is only available on the value prior to you occupying the house (it is not equitable to be taxed on the % occupied/total ownership encompassing the complete increase in value less the cost base if it was not possible to occupy until the dwelling is built) – discuss this option with your accountant.
Hi Scott,
Thank you for your comments. However, I feel I may have explained the situation a little poorly.
Let me have another go.
At this point I have 2 homes, one almost ready for occupancy(Block
, the other, also built new, we have lived in for the past 3 years(Block A). We are moving into the new home as soon as the fencing is complete (but house is already completed hence my query on "as soon as practical"). It also will eventually be sold as our appointment in this region only goes for a further 12 months. These homes are more suited to owner occupier and there is little market for rental of executive style homes here at a reasonable return hence the sale. Block A is currently in the process of being sold, so there is not able to be turned into an IP as you mention above.I understand the concept of renting out the PPOR and in turn renting elsewhere – it is not applicable in this instance.
I had no income on another vacant block of land that I sold, but at the realisation of profit, I was able to claim all expenses, would this not also apply to the above situation?
SO…….
If I choose to nominate Block B (almost ready for us to move into) as our PPOR, we are able to back date it for up to 4 years according to the above ruling, BUT how do I classify Block A when it is sold? I feel it will be classified as a CGT event (I am OK with this – it has the less growth), so do I then claim all expenses retrospectively as I did for the previously mentioned vacent land?
I hope that is a little clearer. Sorry, this is why I posted, to get it all clearer before going to the accontant. Scott, you have probably saved me the cost of a good dinner by making me explain myself better, so cheers mate.
Mick
, the other, also built new, we have lived in for the past 3 years(Block A). We are moving into the new home as soon as the fencing is complete (but house is already completed hence my query on "as soon as practical"). It also will eventually be sold as our appointment in this region only goes for a further 12 months. These homes are more suited to owner occupier and there is little market for rental of executive style homes here at a reasonable return hence the sale. Block A is currently in the process of being sold, so there is not able to be turned into an IP as you mention above.You must be logged in to reply to this topic. If you don't have an account, you can register here.
