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Principal Place of Residence, CGT, First home buyers grant

Discussion in 'Real Estate' started by wthai, 9th Jun, 2010.

  1. wthai

    wthai New Member

    Joined:
    9th Jun, 2010
    Posts:
    1
    Location:
    Sydney, NSW
    Hi,
    I'm thinking of doing the following as an investment (throught reno) but am not sure if my thoughts are correct.

    1) Buy a house with the intention of keeping it for at least 6 months. This will let me get the first home buyers grant.
    2) Claim the house is my PPOR (principle place of residence).
    3) Reno the house to try and increase it's value.
    4) Once 6 months is up, sell it (hopefully for profit) and avoid capital gains tax due to PPOR.

    Does anyone see anything wrong with this? or can offer any suggestions or advice? or if you've done just what I've described?

    Thanks
    -Warren
     
  2. Vagon

    Vagon Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    56
    Location:
    Sydney
    Stamp duty, agent and legal fees on the exit side might hurt you. I've never done any serious renovating but everyone seems to indicate planning is key, setting a realistic budget and incorporating not only the exit fees but the cost of living while key rooms are out etc.

    Good luck.
     
  3. KateMelb

    KateMelb Active Member

    Joined:
    17th Apr, 2010
    Posts:
    33
    Location:
    Melbourne, Victoria
    Warren, the tax office may require proof of this (e.g. bills in your name at the address, receipt from removalist etc).

    The ATO has some handy info about CGT here: Is your home exempt from capital gains tax?
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

    Joined:
    10th Jun, 2005
    Posts:
    1,172
    Further to what Kate mentioned, you need to be careful with this if you seek to sell CGT free. The ATO can view that you are actually in the business of buying houses, renovating them whilst living there and on selling and thus the houses become "stock" and you get taxed on every dollar of sales proceeds (but on the flipside then the expenses are generally deductible and depreciable).

    Even if you do this once it can be classed as you being in business of doing it (albeit extremely unlikely).

    Cheers
    N