Thanks again.
The 650K house has been a PPOR for 3 years now – but we need more space.. hence the consideration of moving out. I can’t swing a small baby in here… (my wife wouldn’t let me anyway)
I’ve always seen rent as “why pay off someone else’s mortgage”.. so never really thought about it as an option, There are a number of ‘old wife’s tales floating around which I need to be careful about. Now I’ve put some sums together however – i seem to be better off if I rent.
I’ve been reading about CGT, and seem to have 2 conflicting opinions:
1. After living in a property for 6 months – it becomes CGT exempt for 6 years
2. A property is CGT exempt only for the portion of time that you live in it as your PPOR.Are these better off as new topics, or continuing the same one?
With certain conditions
After living in a property for 6 months – it becomes CGT exempt for 6 years
is the accurate one of the two.
Richard Taylor | Australia's leading private lender
Pepper, have you considered a dual occ property?
That's what I'm doing. I live in one side, and rent out the other. Helps with the rent, and makes it easier to go down to a single income when your wife has a baby.
(Just found out my wifes pregnant with the first yesterday!)
Congratulations Benjamin!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Congrats too! Kids are great… apart from that first week out of the hospital… scary as hell. That week for me was like the opening scene of Saving Private Ryan… be warned
So back to CGT…
I buy a property on Jul 1st 2010
I move in July 2nd, 2010
I live in it for 6 months, then move out on Jan 3rd, 2011.I sell the property on June 30th, 2016. I haven’t lived in it as a PPOR since Jan 2011.
The property has increased in value.
Is it true to say there is no CGT to pay?
Cheers
It could be true…. where have you been living been Jan 2011 and June 30th 2016? If you have been living in another place that you own, and are declaring it to be your PPOR, then there will surely be CGT owing on the property you sold…
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
PeppersGhost wrote:apart from that first week out of the hospital… scary as hell. That week for me was like the opening scene of Saving Private Ryan…It's really not that bad, PeppersGhost – you big sook. Not even for the mother! (Unless you get very unlucky). Take that week off work, step in and do the washing and the cooking and let the new Mum sleep and care for the baby and recover from labour or surgery (or both).
Sorry, can't answer the CGT question. I'll leave that to those who know for sure, and I'll stick to my area of knowledge – babies!
take a look at this; https://www.propertyinvesting.com/forums/property-investing/help-needed/4330225
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
haha. Thanks guys.
And CGT, so Jacm, I take it based on that link, the answer to pepper is 'yes, you can avoid cgt?'
PeppersGhost wrote:I buy a property on Jul 1st 2010 I move in July 2nd, 2010 I live in it for 6 months, then move out on Jan 3rd, 2011. I sell the property on June 30th, 2016. I haven't lived in it as a PPOR since Jan 2011. The property has increased in value. Is it true to say there is no CGT to pay? CheersYou don't have to live in it for 6 months. There is no minimum.
But you have to be able to prove you lived inthe property. Main residence exemption is a question of fact, so the ATO look at things like; having your mail go to the address, connecting power, telephone, gas in your name, changing your drivers licence, etc
Practically, you would need at least a couple of months in the house for it to qualify as your PPOR,
And it only retains PPOR status if you don't buy another house to live in. You can only have one PPOR at a time.
Dont need to be in the property 6 months for GCT but you certainly do for the FHOG and possibly the Stamp Duty concession.
Richard Taylor | Australia's leading private lender
My understanding is that in this case, pepper could avoid CGT. However, if Pepper was living in another house which he/she owns, then probably not, because the one being resided in is considered to be the PPOR and thus the CGT exempt property. That is my understanding. Not my legal advice hehehe. A quick anonymous phone call to the ATO would answer the question. I have called them about many things. Give them a buzz pepper, and let us know what transpires.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks for all your help.. again..
The ‘advice’ I got, was that as long as I lived in it for 6 months, it will be CGT exempt for 6 years… REGARDLESS of where I then go and live (as my PPOR or other).
What you are all suggesting though is, I can only claim CGT exemption whilst the property is my PPOR. I can only have one of these at a time…
In the situation above:
I buy a property on Jul 1st 2010
I move in July 2nd, 2010
I live in it for 6 months, then move out on Jan 3rd, 2011.
I sell the property on June 30th, 2016. I haven’t lived in it as a PPOR since Jan 2011.Assuming I need a PPOR between 2011 and 2016 – (otherwise, where will I live?), I will have to pay CGT on the increase in value from the time I moved out and obtained a new PPOR, to the time I sold the property?
This clearly means if I have a portfolio of properties, the only CGT exemption I can claim is for the allocated PPORs during the period, of which there can only be one at a time. This makes sense, and seems fair and intuitive…. HOWEVER
I have been reading “Your Investment Property”, Feb 2010 issue. The Winner of the ‘Investor of the Year’ Award (Prue Muirhead), has some simple factors to share about her success. These are:
1. Buy as early as possible
2. borrow as much as possible
3. hold it forever
4. DON’T PAY CGTNow I’m confused! How can you hold multiple properties… forever (even metaphorically)… and not pay CGT? When you have more than one property, and property prices rise, and you can only have one PPOR, you must be liable for CGT.. or have I missed the bleeding obvious here?
I’ll call the ATO today and see what happens, unless someone can shine some light on this?
Cheers everyone
you only pay CGT when you sell. Never sell, never pay. Only pay income tax on rental income (unless you run a loss)
Someone more knowledgeable might be able to confirm this.
Okay – so the reason why no CGT is paid, is because the properties are NEVER sold.. now I get it, makes sense I suppose – use the capital growth to borrow more against, rather than accessing the direct financial value by selling.
Thanks SHales.
SHales wrote:you only pay CGT when you sell. Never sell, never pay. Only pay income tax on rental income (unless you run a loss)Someone more knowledgeable might be able to confirm this.
Thats right, Capital Gains Tax is a cost of selling. You don't pay any CGT until you sell. So if you hold the properties forever, then you never pay CGT. (Your estate will, but you won't have to worry about that!)
Peppers, the advice you got about the 6 year CGT exemption is incorrect. You can only have one PPOR at a time.
If you buy a property to live in, then move out, rent it out and RENT somewhere else yourself, then you are only claiming one PPOR. But if you BUYsomewhere else to live in, then the 6 year rule doesn't apply.
Ahh, thank you Dan, so there is the distinction. So long as you don't BUY a PPOR.
So, for us. In 2002, we rented out our PPOR after living in it for 2 years. We moved into employer provided accom for about 4 years, then we bought another house as a new PPOR. Our CGT starting point for the first house is 2006 – is that right? So CGT is payable on price sold minus 2006 price (adjusted for inflation)?
That's terrific, I didn't know about this until this thread. That's going to save us a bomb.
cheers
S
Great stuff
So if I allocate a PPOR, but rent elsewhere and don’t actually live in it, can I then rent out the PPOR to a tenant, and still effectively use it as an investment property?
Cheers
SHales wrote:Ahh, thank you Dan, so there is the distinction. So long as you don't BUY a PPOR.So, for us. In 2002, we rented out our PPOR after living in it for 2 years. We moved into employer provided accom for about 4 years, then we bought another house as a new PPOR. Our CGT starting point for the first house is 2006 – is that right? So CGT is payable on price sold minus 2006 price (adjusted for inflation)?
That's terrific, I didn't know about this until this thread. That's going to save us a bomb.
cheers
S
You have two options. You can CGT on the percentage of time it was not a PPOR, or you can pay on the basis of the 2006 valuation. You can use whichever option gives you the best result.
ie bought in 2000, PPOR until 2006, sold in 2010. You can pay CGT on 40% of the total gain (4 years as non-PPOR) OR, pay CGT on 2010 sales price, less 2006 valuation.
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