Hi There all,
I am new to this site and new to the Property investment market.
Although I am sure there will be a lot of information I need to absorb and also taking in all the advice and opinions here in the forums (which are brilliant) I would like to know more about the CGT.
I recently leased out a unit I bought 3 years ago in which I have been living in, and my capital growth has risen substantially (around $100k in 3 years).
I have been told that prior to moving out if I obtained a document stating an estimate valuation of what the property is worth at the time, when or IF I must sell down the track the capital gains tax I would have to pay would be off this recent vaulation (unoffical vaulation) of the unit instead of my purchase price 3 years ago?
Is this right and are there any limitations for me to consider regarding the Capital Gains Tax.
Also, how is capital gains tax calculated? or is there a formula?Thank You for you comments on this one.
Cheers
JasonHi Jason
Are you saying you lived in the unit first and then rented it out?
If so you may be able to avoid CGT totally and still rent it out for up to years as long as you are not claiming the CGT main residence exemption on any other property.
Otherwise you will be up for CGT from the date you rent it out. For CGT purposes the market value at the date when first used to produce income will be important, s118-192 ITAA 1997. So you should get a valuation as of that date (the higher the better too).
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
Hi Terry,
Yes thats right, I have been living in the unit for the past 3 years ow leased out.
If so you may be able to avoid CGT totally and still rent it out for up to years as long as you are not claiming the CGT main residence exemption on any other property.
Sorry up to how many years ? (your above statement)
Cheers
Jason6 years.
(the 6 on my keyboard don't always work!! – maybe like your 'n'?)
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
haha yes your right, missed the "n" there.
Ok So I would assume in that case after 6 years the capital gains tax would be calculated from my current valuation prior to leasing out the property correct?
And if I was to sell before the 6 year period (from start of lease, which is now), there is no CGT to pay?
Cheers
JasonI think the cost base would be the valuation at the date the 6 years ends.
if you sell before 6 years there would probably be no CGT.
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
Great, Thank You very much for your help on this one.
I have heaps to learn but good to know there are people on here willing to help:)
Cheers again
JasonAnd, just move back into the property 5 years 11 months after you moved out and then later move out and you will get the 6 years again.
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
Ok so as long as I move in for a short period of time within the 6 years it starts again, even though it had been previously leased.
Great, also good to know.
Thank You very much again.
Cheers
JasonHi Jason,
In case that you don't move back in and just keep renting out the unit, there is the following to consider. As the current valuation will be used as the base for calculating capital growth from now until you sell the property one day (if you do so), you should try to get the highest valuation possible now. This could mean getting a couple of different ones, or asking real estate agents for appraisals and get the highest one in writing. If you get a valuation (instead of an an appraisal) make sure you ask for a 'market appraisal', as that is usually higher than a 'bank appraisal'.
I would suggest getting 3 real estate agents appraisals to see where it all lies. That way you can make an informed decision. I loved giving appraisals as an agent- the more you give the more chance you have of a sale. They are free from agents.,
AND valuers would call us anyway to get market feel.Hi THere,
Thank You both for the great advice, will definitely keep that in mind and shop around for appraisals
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