I have made an offer on a property but the seller wants the right to rent for 3-4 months after settlement, and it actually suits me as I am heading overseas for most of the period. This will be my principal place of residence, and as such should be CGT exempt, but since I can't move in until say 4 months after settlement, how does that impact the exemption? They won't accept a delayed settlement, as they need the funds for building a new home. I believe if you live in a property for a year, you can then rent it out for 6 years and retain CGT exemption, but what happens in the proposed circumstance. Would really be grateful for any advice .. and be gentle, please .. I have just joined this forum.
From my simpleton
point of view and seeing it suits you, why just not reduce your offer down to the equivalent of the 3-4 months rent and allow them to stay there rent free for the period.Thanks Beedie … sensible advice except the vendors' agent is pushing for more money and there is no way any reduction in my offer would cut the deal. I have offered them rent free for the whole period which in effect is an extra $6000 on my offer, bringing me to just $23,000 below the asking price. In this market I thought that more than fair for subject only to bldg, pests and title search, no finance, but seems the vendors think all the hits on their property on realestate.com translate to potential buyers… not also nosey neighbours, other sellers checking out the opposition, and people with time on their hands and a vague interest in real estate. It's ok … there's always another property, and it is what it is!!
Wander .
……… sounds like you have your head on your shoulders and keeping the emotion out of it….. Its a buyers market and the agents job is to push you up…… has he actually presented a signed contact to the vendor or is it all been verbal???If its in print it has to be true………
I would think it won't become your main residence until you move in. So any growth in value during this time may be subject to CGT – but how much do you expect it to grow in 4 months?
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 the advice Beedie and Terryw … have cut the deal and learned some more in the process. The renting a principal place of residence after residing in it for a year, and maintaining your CGT exemption ruling only applies if you don't buy another property that becomes your PPR eg you take a job overseas. In my situation all is fine since, though settlement is in January, I don't move into the property until May, and so long as you occupy within twelve months of purchase you can claim the CGT exemption. I did the deal by offering the vendors rent free so it isn't earning an income for me, and isn't therefore an investment property. Great to find this forum. Property is a passion of mine, and it's good to have others to bounce off.
WW are you sure?
My understanding is that a property cannot become your main residence until you have lived in it. Not that it will make much difference as any capital growth during the first 4 months will be minimal.
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
To claim the PPORE on a property between the time you sign the purchase contract and the time you move in, you have to move in as soon as is practically possible.
http://www.ato.gov.au/individuals/content.asp?doc=/content/57404.htm&page=5&H5
says:Quote:If you could not move in because the dwelling was being rented to someone, you are not considered to have moved in as soon as practicable after you acquired your ownership interest. You are, therefore, not eligible for the main residence exemption for that period – that is, from the date of settlement until you move in.I think you might be getting confused with the “extending the PPORE” rules”.. you cannot extend the exemption in reverse, you can only extend it into the period AFTER you lived there. per:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htmAlso… by renting the property before you live in it.. you will loose access to the “home first used to produce income rule” – which can sometimes save you a bunch in CGT, but probably not really that relevant in this case.
Thanks again Terryw and Mr 5o1 … I guess I just fall back on the idea of how much capital growth can the property gain in 5 months? My accountant seems to think I'm "home & hosed" since it is not earning any income at all with the rent free concession, and the facts: Contract signed 30.11.10; Settlement 10.1.11; vendors vacate 1.5.11; and I can demonstrate that I was overseas 30.1.11 to 23.4.11 anyway.
Then again accountants can get it wrong I guess. With the market as it is I don't expect meteoric rise in value in the first quarter however. For once I will be content with that!
Wanderwoman
point of view and seeing it suits you, why just not reduce your offer down to the equivalent of the 3-4 months rent and allow them to stay there rent free for the period.
……… sounds like you have your head on your shoulders and keeping the emotion out of it….. Its a buyers market and the agents job is to push you up…… has he actually presented a signed contact to the vendor or is it all been verbal???
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