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CGT on Investment Property

Discussion in 'Accounting, Tax & Legal' started by Frank001, 1st Apr, 2013.

  1. Frank001

    Frank001 New Member

    1st Apr, 2013
    Hi All.

    Long time reader, first time poster.

    I purchased a property 13 years ago, lived in it for a year when first purchased but it has subsequntly been rented out since.

    The time has come and I am going to put this property on the market in the coming months, but had a few questions in regards to Capital Gains Tax.

    1) As I lived in the house for a year does that work in my favour at all?

    2) Does interest paid on the loan during the time it was rented work as a deduction during CGT time?

    3) Ive heard that instead of paying CGT, re growth forest can be bought? Any truth to that story?

    Looking forward to the replies.

  2. Kelly Black

    Kelly Black Member

    25th Mar, 2013
    Melb, VIC
    Hi Frank,

    To answer your questions:

    1. Yes slightly, provided it was your Principal place of residence during that time (ie you didn't have another property that was your PPOR). Your capital gain will be reduced by 1/13th.

    2. I assume you claimed a deduction for this interest against the rental income, so no you cannot claim it again as a capital cost

    3. Personally I would steer clear of any sort of forestry scheme, but will leave that for other members to comment on. I have seen so many stories of people losing money or having assessments amended years after claiming these schemes deductions (with interest and penalties), so wouldn't go near them myself, but other members may have first hand experience

  3. Terryw

    Terryw Well-Known Member

    9th Jun, 2006
    After you moved out did you have another main residence?

    If yes, then my answer differs to Kelly slightly.
    1. The CGT won't be calculated on a time basis but on the value as of the date you moved out. s 118-192 ITAA 1997

    If no, my answer differs a fair bit.
    1. You could possibly count first 6 years as CGT exempt due to s118-145.
    see Losses and CGT minutes, June 2010 question 2.
  4. OneStopTax

    OneStopTax New Member

    27th Nov, 2012
    One stop tax

    Even if you had another main residence when you moved out, you might be able to elect to treat it one as your main residence for a maximum of six years.

    Which house they choose as your main residence for this overlapping six years will depend on comparison of the expected capital gain on the sale of each home.

    ONE STOP TAX | Registered Public Accountants & Tax Agents
  5. iraj

    iraj New Member

    9th May, 2013
    Brisbane, QLD
    I agree with Terry. You can claim the first year you lived in the property plus six years after that (7 years in total) as your main residence and only pay tax on 6/13 of the capital gain. However you need to remember that you can only have one main residence at a given time and if you choose this method then you need to pay capital gains tax on the other property that you bought.