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PPOR to IP and back to PPOR

Discussion in 'Real Estate' started by hooperscomputers, 9th Nov, 2009.

  1. hooperscomputers

    hooperscomputers Member

    Joined:
    9th Nov, 2009
    Posts:
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    Location:
    Penrith NSW
    I have a scenario that I am trying to get my head around.
    I purchased a property as a PPOR about 13 years ago for $119,000. Lived in it for approx 3 years, then moved out and purchased a house with by brother 50/50,and turned the first house into IP. Lived in the new house with my brother for about 4 years. He then bought me out of the new property and I used the money to help my girlfriend at the time to purchase a house.

    She is the only one on the title for the house she purchased as her PPOR and I am on the loan , I moved into the house as well but still have the original property as an IP.

    Can I still claim the IP as my PPOR for the last 6 years and only pay CGT on the remaining 4 years that the property was an IP while I was living in a property with my brother that i owned 50/50?

    Another question I have if the above scenario can't work is the property is currently tennanted and is in poor condition and valued at approx $260-270,000, Can I have this property valued when I get rid on the tennants, claim it as my PPOR from when they move out as I currently only have this property in my name only ( the house i am living in is in my wifes name only) then clean, paint and renovate the property to increase its value to hopefully sell for around $300-320,000 and avoid paying extra CGT for the extra gain of $30-40,000?

    Any help would be greatly appreciated.

    Thanks
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    No - you can only claim the IP as your PPOR for up to 6 years immediately after you moved out. Given that you would have treated your shared house purchase as your PPOR for the 4 years you lived there, I would think the most you would get away with is claiming the IP as a PPOR for 2 years from the time you sold your interest in the shared house.

    You'd need to get advice on that though - not sure how the ATO would view it.

    Depending on the amount of growth involved in each property, you could potentially go back and treat the IP as being your PPOR for the whole first 6 years after you moved out, and treat the shared house as NOT your PPOR - meaning that you would pay CGT on the difference between what you paid for for your half and what you sold it for (minus 50% discount for holding it for more than 12 months).

    Given that time has passed since then, the ATO might take a dim view of this, so advice is required there as well.

    In regards to your last question - I'm not sure of the ramifications of this. I think in theory it could work.
     
  3. hooperscomputers

    hooperscomputers Member

    Joined:
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    Location:
    Penrith NSW
    Second option

    If the first part of my scenario is no good would my secong option be viable?

    That is

    Another question I have if the above scenario can't work is the property is currently tennanted and is in poor condition and valued at approx $260-270,000, Can I have this property valued when I get rid on the tennants, claim it as my PPOR from when they move out as I currently only have this property in my name only ( the house i am living in is in my wifes name only) then clean, paint and renovate the property to increase its value to hopefully sell for around $300-320,000 and avoid paying extra CGT for the extra gain of $30-40,000?

    Is this a possibility?

    Thanks
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
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    Location:
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    That's the bit I was referring to when I said "in theory it could work".

    Hopefully someone else will be able to add their opinion on this.
     
  5. Billv

    Billv Getting there

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    Location:
    Sydney, NSW
    I don't see why it wouldn't work, in fact you could probably go 1 step further and do some of the repairs while it's still an ip and get tax some deductions.
    Talk to your accountant and he'll be able to advice you as to what's best in your situation