CGT

Viewing 5 posts - 1 through 5 (of 5 total)

cabramatt
Participant
@cabramatt
Join Date: 2011
Post Count: 13
May 30, 2012 - 11:35 am
Hi All,
Sorry if these are dumb questions…I dont know where to find the answer so I am starting a new thread. I have 2 questions to ask about CGT:
Situation 1: My partner has Property A (a PPOR). Another property (property was bought in August 2011 and settled in September 2011. We wanted to buy property B in order to knock down and build.
However, it took a while to sell Property A (the initial PPOR). So we continued living in Property A and kept Property B vacant -no income was being made. Finally in May 2012 property A was sold and settled. During this time we still kept Property B vacant and just rented another house to live in because we were in the process of finding builders. ATM Property B is still vacant and we are still renting…and hoping to build soon…
My 1st question is: Will we have to pay capital gains tax on Property B in future if we were to sell?? I know about the 6 months rule where you can have 2 properties as your PPOR for 6 months…but ours was over 6 months so how will CGT affect us??
Situation 2: I have a family home under my name. I am planning to get married next year and will be moving into my partner's house. However, my family home under my name will continue to be a family home…I receive no rent and will allow my frail parents to live there indefinitely. Hence, it is NOT an investment property.
My 2nd question is: Will i still have to pay CGT on the family home in future when I sell considering that I am not using it to produce income?
Thanks in advance for any replies…
C
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
May 30, 2012 - 12:15 pm
The 6 month rule could possibly apply for a 6 months of the time if B becomes your main residence eventually.
s118-140 ITAA 97.
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.140.html
But, since you have not lived in B yet then it isn't your main residence so the 6 year rule won't apply, s118-145.
But if you construct a main residence on B and then live there for at least 3 months then the dwelling could be classed as a main residence and be exempt from CGT under s 118-150.
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.150.html
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Scott No Mates
Participant
@scott-no-mates
Join Date: 2005
Post Count: 3,856
May 30, 2012 - 11:05 pm
As you don’t live in your family home you may be liable for land tax even if you don’tget income . This may also apply to the house that you intend to build – you are required to register for land tax even if you are below the threshold.
Dan42
Member
@dan42
Join Date: 2008
Post Count: 619
May 31, 2012 - 4:16 am
cabramatt wrote:
Hi All,
Sorry if these are dumb questions…I dont know where to find the answer so I am starting a new thread. I have 2 questions to ask about CGT:
Situation 1: My partner has Property A (a PPOR). Another property (property was bought in August 2011 and settled in September 2011. We wanted to buy property B in order to knock down and build.
However, it took a while to sell Property A (the initial PPOR). So we continued living in Property A and kept Property B vacant -no income was being made. Finally in May 2012 property A was sold and settled. During this time we still kept Property B vacant and just rented another house to live in because we were in the process of finding builders. ATM Property B is still vacant and we are still renting…and hoping to build soon…
My 1st question is: Will we have to pay capital gains tax on Property B in future if we were to sell?? I know about the 6 months rule where you can have 2 properties as your PPOR for 6 months…but ours was over 6 months so how will CGT affect us??
Yes, you get 6 months 'crossover' when buyinga new PPOR, so there would be no CGT issue for this period. Most likey you will be liable for some CGT on Property B, as it wasn't moved into as soon as you were able to. If you don't move in for, say 2 and a half years, and you hold the property in total for 10 years, then you will pay CGT on 2/10ths of your capital gain, then halved again. (so efffectively 1/10th, or 10%)
But, the holding csots, interest and building expenses will form part of your cost base for capital gains, so the interest and holding costs will most likely outweigh the 10% of the profit. So yes, you will be selling a cGT assewt, but the likelihood is you will have hardly any tax to pay, if any at all.
cabramatt wrote:
Situation 2: I have a family home under my name. I am planning to get married next year and will be moving into my partner's house. However, my family home under my name will continue to be a family home…I receive no rent and will allow my frail parents to live there indefinitely. Hence, it is NOT an investment property.
My 2nd question is: Will i still have to pay CGT on the family home in future when I sell considering that I am not using it to produce income?
Thanks in advance for any replies…
C
Yes, as you can only have one PPOR at any one time. A married couple can not have one house for him and another for her, so if you chose to keep the family home as your PPOR, the new home will be subject to 50% CGT (IE – your share) of the capital gain.
Depending on when the family home was purchased, you may be able to add holding costs to the cost base. .
cabramatt
Participant
@cabramatt
Join Date: 2011
Post Count: 13
June 3, 2012 - 9:51 am
Thanks everyone for your replies!!!!! It was very helpful!!!