Hi,
I'm trying to determine what my PPOR is determined as for CGT purposes.
My wife and I bought a house in Adelaide in September 1999. We lived in it until April 2004, began renting it out, lived with my brother for a month then moved overseas for almost 2 years. We returned to Australia in January 2006, but continued to rent out the property until May 2006, whilst living with my brother again. We then moved back into it for 4-5 months before moving to QLD. We lived with our in-laws in QLD from Sept 2006 – January 2007 at which point we bought and moved in to a new home on the Gold Coast.
We are about to sell our original/Investment property in Adelaide, so I'm trying to determine what my PPOR is determined as for CGT purposes from the point we turned our Adelaide property into an Investment property. Its not really clear to me from my reading to date whether living with family is considered a PPOR. I'm wondering whether this fact could actually play in our favour for the 6 year exemption as we only purchased another property as a PPOR in January 2007.
Any help is much appreciated.
Thanks.
Kirk.
HI Kirk,
Not an accountant so take what I say with a grain of salt.
You are allowed to vacate, and rent out, your home for up to 6 years without incurring CGT provided you do not own another home. N.b. There is a 6 months transitionary period if you try to sell one while moving into another.
So having said that my understanding is your Adelaide home is CGT free from day of purchase up until the time you bought and moved to the Gold Coast (Jan 2007).
It may be possible to retain Adelaide as your PPOR right up to this point in time. If you do this then you obviously will not be able to claim your Gold Coast home as PPOR. Check this last point out as my memory is a little fuzzy on this and I am sure someone more knowledgeable than I will clarify this for you.
Key point is that you will be liable for CGT on one of the properties in the period Jan 2007.
The legislation says
"118-145(4) If you make the choice, you cannot treat any other * dwelling as your main residence while you apply this section, except if section 118-140 (about changing main residences) applies."
So you cannot treat the first house as your main residence if you treated your house overseas or the one in QLD as your main residence during the same period.
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 responses and I will be getting professional advice so really just trying to clarify things in my mind before doing that.
Terryw – so do you feel that we wouldnt be eligible for the 6 year exemption despite not owning another property until Jan 2007?
Cheers.
Kirk.
You could be eligible for full or partial exemption
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
Am i right in thinking that i should use the market/agreed value of my Adelaide property in January 2007 (date we purchased our Gold Coast property) to determine my CGT, ie. if the market value was 410k in Jan 2007 and we sell for 430k then the capital proceeds we need to work with to determine our CGT is 20k.
Does that sound right?
Thanks.
Kirk.
yes, probably should get a valuation as of the date it ceased to be your main residence.
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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
