A Tough Decision

Viewing 4 posts - 1 through 4 (of 4 total)

HarryMarcus
Participant
@harrymarcus
Join Date: 2012
Post Count: 16
February 10, 2013 - 10:08 am
Hi all,
I recently purchased (what was intended) to be an IP property (apartment) that I'm renovating, which will hopefully be complete in two or so weeks. Upon completion, I believe I've conservatively manufactured $40-50k.
My PPOR is located within the same suburb and currently has approximately $100k in equity.
This is where it gets interesting. I intended on renting the new property out however I did some research on CGT and realise that if I move into the property it would be considered a PPOR so will be CGT exempt.
What I'm unsure of is:
- If I move into the new property, will my old PPoR remain CGT exempt for up to 6 years?
- How long must I remain in the new property before I can sell it without triggering CGT?
If however, my current PPOR loses its CGT exemption status, would selling it at this point in time to realise the equity in cash and moving on to the new PPOR be a wise idea? It would be a downgrade but if it's a short period of time the exemption of CGT would make it feasible.
For what it's worth, weekly holding costs of either property are virtually identical.
Some advice to a newbie would be greatly appreciated.
Thanks,
Harry
Jacqui Middleton
Participant
@jacm
Join Date: 2009
Post Count: 2,539
February 10, 2013 - 10:27 am
re: If I move into the new property, will my old PPoR remain CGT exempt for up to 6 years?
No. Once you move into another property that you own, your original property is immediately no longer eligible for the exemption. The only circumstance under which you can sort of have two PPORs on the go at once is if you are in the process of selling one.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone Me
VIC Buyers' Agents for investors, home buyers & SMSFs.
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
February 10, 2013 - 11:18 pm
JacM wrote:
re: If I move into the new property, will my old PPoR remain CGT exempt for up to 6 years?
No. Once you move into another property that you own, your original property is immediately no longer eligible for the exemption. The only circumstance under which you can sort of have two PPORs on the go at once is if you are in the process of selling one.
Jac, not neccesarily so. The old PPOR could still be nominated as the main residence and the exemption applied for up to 6 years. Cannot also nominate the new one though.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
February 10, 2013 - 11:21 pm
HarryMarcus wrote:
Hi all,
I recently purchased (what was intended) to be an IP property (apartment) that I'm renovating, which will hopefully be complete in two or so weeks. Upon completion, I believe I've conservatively manufactured $40-50k.
My PPOR is located within the same suburb and currently has approximately $100k in equity.
This is where it gets interesting. I intended on renting the new property out however I did some research on CGT and realise that if I move into the property it would be considered a PPOR so will be CGT exempt.
What I'm unsure of is:
If I move into the new property, will my old PPoR remain CGT exempt for up to 6 years?
How long must I remain in the new property before I can sell it without triggering CGT?
If however, my current PPOR loses its CGT exemption status, would selling it at this point in time to realise the equity in cash and moving on to the new PPOR be a wise idea? It would be a downgrade but if it's a short period of time the exemption of CGT would make it feasible.
For what it's worth, weekly holding costs of either property are virtually identical.
Some advice to a newbie would be greatly appreciated.
Thanks,
Harry
Moving into the second one immediately could assist you down the track. You won’t know which one will have the most capital growth until much later (maybe they will be similar growth because same suburb). But the good thing is that you don’t have to chose which one you will nominate for the CGT exemption until the year you sell. So if you make sure both could qualify as the main residence then you may be able to wait 6 years and then reassess.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au