Hello Guys,
My question relates to asset sale and CGT implications. Please note below the situation:
Property One – Purchased in Dec 2006 and I lived their with my partner until Feb 2008;
Property Two – Purchased in Jan 2008; and moved-in around Feb 2008
Now I want to sell the Property One. What would be my best option? Use Property One as PPOR until its sold (as CG is higher there) and start using my current residence as PPOR once the property One is sold? Do you need to get the Property Two revalued (by a local valuer or real estate agent) around the time I have sold Property One so that I have some proof of market price when the property was converted into PPOR and what price?.And adding another layer of complication, what base value I’ll be using if I decide to subdivide the Property Two (just separate part of land, build a small dwelling) and sell the new dwelling. And I’m assuming that I’ll be entitled for 50% CGT discount upon the sale of this dwelling and will be able to receive 100% CGT concession if I sell PPOR after living there for minimum 12 months (from the date Property One was sold).
Thanks
You would have to work out a comparison on what the CGT would be on both. And then factor in the ooprtunity cost of paying the tax now on the one you sell or retain the exemption for down the track.
If you rent the house out before living in it then the CGT is worked out of a time basis. If you live in it first and then rent it out you can take the value at the date if became a rental and use that as your cost base.
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 Terryw.
Now, what would be my best bet to get the valuation for the property One in February 2008 which is acceptable to ATO. An indicative valuation from a real estate agent???
Cheers
will need a valuer. Real estate agents cannot give valuations – unless they are also licenced valuers.
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
Terryw: And I'm assuming the valuation won't come free in that case and I may also struggle to get a v'aluation in 2008'.
certainly not free but a valuer can do a value as at a certain date in the past.
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 Anandd,
We are in the similar situation.
“
And adding another layer of complication, what base value I’ll be using if I decide to subdivide the Property Two (just separate part of land, build a small dwelling) and sell the new dwelling. And I’m assuming that I’ll be entitled for 50% CGT discount upon the sale of this dwelling and will be able to receive 100% CGT concession if I sell PPOR after living there for minimum 12 months (from the date Property One was sold).
“You need to have enough “excuses” to convince the ATO that you are not doing property development business. Otherwise, you will not entitiled for 50% CGT discount, even worse, you will need to pay the GST for your new dwelling.
PS: I am not an accountant, please anyone correct me if anything wrong. thanks
Pei
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