All Topics / Help Needed! / CGT assessibility on ex PPOR turning into IP

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  • Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 114
    May 10, 2017 - 2:25 pm

    Hi experts,

    Can you share some advice on how CGT trigger may apply in the following scenario as I am planning
    what the best step to take next.

    Current have a PPOR which I am planning to sell. Also having a new place few months away from completing
    the construction and meant to be a future PPOR.

    My accountant advises that only one PPOR can be elected and another property even though not being rented
    out will just be subject to CGT assessment when time to sell.

    The concern I have is as much as I want to sell off current PPOR so I can move into the new place, I
    don’t want to rush into doing so and undersell it. It is anticipated that, I may have to first move into
    the new place and holding my current PPOR un-tenanted, planning and organising it for sale. That means
    there may be a few months that I am holding two “PPOR” as such.

    My accountant suggests may be better off I rent out current PPOR first so that at least I can cover
    some holding costs. Secondly, that also triggers “change of use purpose” and a re-valuation to up lift
    the cost base for CGT calculation when it is sold at a later time. However, he is not the expert on this
    CGT matter and can’t provide further details if there is a minimum wait period before the new up lifted
    cost base may apply for CGT calculation.

    Any expert with similar experience able to share your advice?

    Thanks,
    FXD

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416
    May 10, 2017 - 2:47 pm

    Hi fxdaemon,

    I too will eagerly await an answer from those who know. In a quick reading, I get the impression your accountant is being a “good bloke” by owning up to not being an expert. In essence, I think I would be looking for someone else to handle my IPs. He might be great with “businesses”, or with Super – just not with property.

    As I understand it, things aren’t as onerous as he has made it sound. e.g. I believe there is a time period where you might have a “PPOR overlap” without creating any problems for yourself. or, if you don’t move immediately into your new PPOR, so long as you do move in (no-one else rents it) there will be no issue to call it your PPOR when it suits you. i.e. you don’t have to nominate it as your PPOR immediately after it has settled.

    Anyway, as I said – I’ll look forward to a proper adviser type who will come along and paint a better picture for you. Me, I just wanted to help you relax a little, as I think it can/will all work out with few issues.

    Benny

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    May 11, 2017 - 12:54 pm

    There are several things you could do
    a) claim the 6 year rule on the current main residence when you move out. It could be totally cgt exempt.

    b) rent the current one out and get the cost base reset to market value at this time and then later sell. Probably minimal to no CGT on this one

    c) pay CGT on the existing and then treat the new one as the main residence for up to 4 years prior to moving in.

    You just have to weigh up which would be better for circumstances.

    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

    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 114
    May 11, 2017 - 3:06 pm
    Terryw wrote:

    There are several things you could do

    b) rent the current one out and get the cost base reset to market value at this time and then later sell. Probably minimal to no CGT on this one

    Thanks Terry. This is the one my accountant also suggested but he is not sure if there is criteria of
    a minimum duration after renting the property out before the new value may be used for CGT calculation
    upon sale.

    I don’t want to get caught out for holding it for too short a duration before selling it. OTOH, if it
    is going to be, for example. a minimum six months holding period then I need to weigh up the pro and
    con versus two other options you mentioned.

    But thanks very much for sharing your suggestions.

    Cheers
    FXD

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    May 11, 2017 - 5:42 pm

    There is no minimum time.
    See the legislation at http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.192.html

    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

    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 114
    May 11, 2017 - 5:58 pm
    Terryw wrote:

    There is no minimum time.
    See the legislation at http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.192.html

    Great and thanks again Terry for able to narrow down to the specific legislation.

    Really appreciate the help. At least now I can properly weigh up which option suits my situation
    best.

    Thanks!!!
    FXD

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