Hi everyone,
Im looking at purchasing a townhouse soon to rent out to someone for a year or 2, while we stay with our parents, then move into it after the 2 years or a year.
We are just about to sell our house, and should exchange next wk, and then we’ll probably move into the parents place.
My question is, when we purchase this townhouse and put tenants in, do we have to pay CGT when we sell it later down the track??
Ive looked at the ATO website regarding this and I didnt understand it. Do we have to claim it as our main residence while we rent it out?? Do we have to move into it as soon as possible then move out??Any help would be really appreciated .
Thanks
Hey Coxy86,
Often time, the ruling from ATO looks at the purpose of the property. If the townhouse is purchased solely for the purpose of investment property, any gain on that property is subject to CGT if its sold. If the townhouse is purchased for your own PPOR, then decided to rent it out, after 12 months or so, then sold it 12 months later, it is still your PPOR hence any gain will not be subject to CGT.
Remember, if you incur capital gain to a property which is purchased solely as IP, you will pay tax if it sold in the future.
to gain a 6 year cgt exemption, you are required to live in it prior to leasing it out. Hence, if you move in, connect all your services, change postal/licence addresses, Then you can prove it is your ppor (until you move out). There is no minimum time unlike fhbg.
If you rent out before living there, then you would be liable for cgt on the period rented over total ownership.
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