Hi again,
Just trying to gain some clarification regarding the eligability for CGT exemption.
How long must you have lived in a property for it to be considered your PPOR and therefore make you exempt from paying any CGT?
Practicality aside, would it not be possible to just move into each previous IP (one at a time), declare it as your sole PPOR and sell with CGT exemption? I know this generally wouldnt be practical, but if this was feasible the possible savings would surely be huge.
Thanks again
D2B
dreamtobelieve wrote:Hi again,Just trying to gain some clarification regarding the eligability for CGT exemption.
How long must you have lived in a property for it to be considered your PPOR and therefore make you exempt from paying any CGT?
http://www.ato.gov.au/individuals/content.asp?doc=/content/36883.htm
You need to be able to prove you live here.
You need to have the intention to live as main residence (no longer refered to as PPOR term changed by ATO to increase confusion)dreamtobelieve wrote:Practicality aside, would it not be possible to just move into each previous IP (one at a time), declare it as your sole PPOR and sell with CGT exemption? I know this generally wouldnt be practical, but if this was feasible the possible savings would surely be huge.Great idea unfortunately the savings won't be huge due to only being able to get the CGT exemption for the proportional time portion that it was your main residence. Also you would need records of the house value at the time you moved in as this is what the ATO refers to as a CGT event. (change of assets use) and is needed to work out the capital gain while you lived in the house and also the value of the house to work out the amount that is subject to capital gain.
(this valuation is more of an issue if you have big time frames involved say for example you rented out the house for say 2 years and then lived in it for say 10 years, now what was the value of the house when you moved in 10 years ago now that you are selling it?)Calculating a part exemption
The part of the capital gain that is taxable is calculated as follows:
Total capital gain made from the CGT event
x
number of days in your ownership period
when the dwelling was not your main residence
total number of days in your ownership periodfrom http://www.ato.gov.au/individuals/content.asp?doc=/content/36883.htm
see also
http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htm
However you can only claim one property at a time as a main residence and I think 7 years is the max time frame7 years as maximum? So let’s say I live in a property for 10 years, rent it out for 5 years, the cgt exemption only applies to 7 years? Making 8 years are taxable instead of 5 years?
dreamtobelieve wrote:Just trying to gain some clarification regarding the eligability for CGT exemption.How long must you have lived in a property for it to be considered your PPOR and therefore make you exempt from paying any CGT?
The legislation does not specify a minimum time. Nor does the ATO tax ruling on this one.
dreamtobelieve wrote:Practicality aside, would it not be possible to just move into each previous IP (one at a time), declare it as your sole PPOR and sell with CGT exemption? I know this generally wouldnt be practical, but if this was feasible the possible savings would surely be huge.D2B
No, this would not be possible because you can only count 1 property as your main residence at any 1 time.
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
This seems to be popping up a lot lately. As Terry said, the legislation and ATO information do not specify a minimum time for you to live in a house before it can become your PPOR.
silverx wrote:7 years as maximum? So let's say I live in a property for 10 years, rent it out for 5 years, the cgt exemption only applies to 7 years? Making 8 years are taxable instead of 5 years?No.
If you have no other PPOR during the time your proeprty was rented (ie, you were renting yourself) you would pay no CGT.
Your property can be classified as your PPOR for up to 6 years if it is earning income, and still be your PPOR, as long as you are not claiming another PPOR. This is because you can only have one PPOR at a time.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
