6 Year PPOR CGT Exmeption

Discussion in 'Accounting & Tax' started by Chris C, 13th Jun, 2008.

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  1. Chris C

    Chris C Well-Known Member

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    I have come across a few people mentioning that if you live in a place that is your PPOR (even if you have utilised the FHOG and only lived in it for 6 months) then move out to rent, and don't buy another PPOR that you have up to 6 year exemption from CGT.

    Is this correct? and under what circumstances does that CGT exemption become void?
     
    Chris C, 13th Jun, 2008
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  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    The CGT exemption becomes void if you buy and move into a new property and claim it as a PPOR for CGT purposes. You can only ever have one PPOR (although there are short-term exceptions when building a new PPOR).

    We did exactly this - bought a PPOR in Adelaide, got head-hunted and moved to Sydney 9 months later for work where we rented (still do). We then rented out our property in Adelaide for the next 6 years as an IP.

    At that point we had a choice to either have it valued for CGT purposes (that would form the cost base for any future CGT calculations), or to sell it. We chose to sell it - to our trust! There was no CGT to pay on the sale, since it was still classed as our PPOR at the time the sale contract was drawn up.
     
    Simon Hampel, 13th Jun, 2008
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  3. Chris C

    Chris C Well-Known Member

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    Does this CGT exmpemtion still apply if you buy a home with someone else, or multiple people? or do you have to buy the PPOR individually?

    Like what happens if 3 people buy a place, make it their PPOR, then they move out, back into rental accomdation and turn the PPOR into an IP, then a two years later one of the 3 people buys another place that they make their PPOR while the other two are still renting and taking advantage of the 6 years CGT exemption period?
     
    Chris C, 14th Jun, 2008
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  4. BillV

    BillV Well-Known Member

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    Chris
    I am not an accountant but I think the same principle would apply
    but in this case 1/3 of the house is yours.
    What happens to your 1/3 share when you buy a new PPOR?
    Do you sell it to 1 of the other guys or do you keep it?
    If you keep it you will probably want to value the property and to get an indicative $ price (for CGT reasons)
    Cheers
     
    BillV, 15th Jun, 2008
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  5. Rob G

    Rob G Well-Known Member

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    Each interest in the property is their respective CGT asset.

    e.g. one may live in it as their PPOR while the others are absent and obtain the main residence exemption on their part.

    Joint ownership of property is a legal and taxation nightmare ... proceed only after getting extensive advice.

    Cheers,

    Rob
     
    Rob G, 15th Jun, 2008
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  6. Chris C

    Chris C Well-Known Member

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    Thanks guys for all the great responses, and I will definitely bring all this up with my accountant I meet up with him.

    Though can I also ask, this 6 year CGT exemption, does this rule also apply to homes that weren't your first home. As in if I buy a home 5 years down the track and live in it for say 18 months, then decide to go back to renting and turn it into an IP, will that home still be CGT free until I obtain a new PPOR?

    Also, what about moving overseas. If you move overseas and buy a place that is essentially your PPOR, I'm assuming that then voids your CGT exemption on your property back in Australia, yes?
     
    Chris C, 16th Jun, 2008
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  7. Simon Hampel

    Simon Hampel Founder Staff Member

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    Can't answer the second question (though I would think that any OS property you buy is irrelevant to Australian CGT exemption - then there's just the resident status for taxation purposes to worry about).

    As for the first question - the rules apply to any PPOR (not just the first) - provided you only ever have one of them at a time.

    Also, if you have an IP which you move into - you would need to have it valued at the time you move in to determine the capital gain since purchase. If you then sold it while it was a PPOR, you would only pay CGT on the initial capital gain before you moved in. If instead, you moved out again and rented (no new PPOR), then you have 6 years before you need to set a new cost base for an additional CGT calculation period - and you also need an appointment with an accountant to make sure you've got all the information you need in case you ever sell it :rolleyes:
     
    Simon Hampel, 16th Jun, 2008
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  8. Saskatoon

    Saskatoon Well-Known Member

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    Saskatoon, 17th Jun, 2008
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  9. Chris C

    Chris C Well-Known Member

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    Chris C, 17th Jun, 2008
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