After living in a 2×1 villa for 9 years, I’ve built and moved into a new house in December 2014. I’ve rented out the villa from January 2015. Based on my calculation the property is slightly positively geared in that it’s on an interest only loan that is at 4.75% on a 266k loan and rented for $340/wk.
Once I account for strata and property management fees it’s almost a break even.
I’m of the opinion however that the market is not in a period of growth but estimate this may change due to the completion of a brand new hospital by November 2015 that is walking distance away that’s advertising up the creation of at least a 1000 jobs. I’m guessing this could imply increased demand for nearby housing by staff who may be stationed there.
If it weren’t for this fact my opinion would be fully one of little to no capital growth. I’m trying to determine whether I’m going to cop capital gains tax on the villa based on the price increase since I paid for it in 2005. It was my primary place of residence up until end of Dec 2014 and I only rented it for the first time in Jan this year.
I got a licenced valuer to value the property based on the renting start date, but I guess my question is what will my capital gains tax obligation likely to be based around if I decide to sell. Based on the increase/decrease since the January 2015 valuation (preferable) or on the increase since the 2005 purchase price?
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This topic was modified 9 years, 6 months ago by
czerney.
Hi Czerney,
Welcome to this place – I hope you get a lot from the experience of “being here”….I got a licenced valuer to value the property based on the renting start date,
Smart move !! Well done.
but I guess my question is what will my capital gains tax obligation likely to be based around if I decide to sell. Based on the increase/decrease since the January 2015 valuation (preferable) or on the increase since the 2005 purchase price?
Since you say it was your PPOR (your home, or “Principal Place Of Residence”) there would be NO CGT to pay up to Jan 2015. There can be further exemptions past that though – and here is where you need expert advice (look out for a reply from Terryw or another accredited adviser).
See, as I understand it, your old home can be rented for up to six years and, IF YOU DON’T move into another PPROR (that is, you rent for yourself), then the CGT exemption can go on with this now-rented property. But you say you HAVE moved in – is the new house your PPOR yet? (Watch for ideas from others around that – re “nominating your PPOR” – that is a whole other subject, and some expert advice would be very good to get (not me!!!)
If you DO move into a new PPOR, I “think” that there can still be a period of grace where you might be able to have both properties as your PPOR for a short period as you change houses. Is that weeks? Or months? I don’t know – but Terryw or others will.
Certainly your CGT won’t be a huge amount – but maybe it can be zero (???)
Benny
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This reply was modified 9 years, 6 months ago by Benny.
Hi again,
Well, you see, THIS is why you need expert advice :-Since you say it was your PPOR (your home, or “Principal Place Of Residence”) there would be NO CGT to pay up to Jan 2015.
It was only after I hit Submit that it came to me – you MIGHT need to pay CGT since 2005 – IF you had partially rented your PPOR at any time over that ten year period.
See, THAT is why an expert needs to answer you – there are so many little “extra bits” that I can’t keep track of them, and maybe haven’t even learned them all anyway.
Benny
my opinion would be fully one of little to no capital growth. I’m trying to determine whether I’m going to cop capital gains tax on the villa based on the price increase since I paid for it in 2005. It was my primary place of residence up u
2 possiblities
1. could be totally exempt under s118-145
or
2. could be subject to CGT on the gain after you moved out under s118-192.You could choose and may want to choose 2 if it will result in little to no tax as choosing 1 may make the current home is subject to CGT. Seek specific tax advcie.
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 Gents for providing the replies will def seek specific advice.
Just to clarify my rather longwinded OP:
Time line:
Oct 2005 – Buy for $205K
Oct 2005 until Dec 2014 – Occupied as Primary Place of Residence (Never Rented)
Dec 2014 – Moved out and into newly built home.
Jan 2015 – Begin renting at $340/week – Licenced Valuation based on Jan 2015 date is $400K. My personal opinion if I sold based on the current market is probably closer to around $350. Current Loan on property is $266k due to some refinancing occurring around 2010.I believe if I sold now there’d be no way I’d achieve a $400k sale despite the licenced valuation coming in at that price.
Thanks again all.
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This topic was modified 9 years, 6 months ago by
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