I am renting where I live. I bought a house recently and my son and his family immediately moved in - rent free. Eventually they will move out and I will move in. In case it makes a difference, then I should state that I am not a foreign owner. I don't own any other properties.
I thought that, if I ever sell, then CGT would need to be calculated.
I have read a bit on the ATO web site but it is unclear. I would appreciate any educated opinions re CGT in this situation please.
Capital Gains Tax Only Son's Family in My New House
Peck on 19/12/2020 - 11:14
Comments
primary residence is cgt free
if u rent out ur property then decide to move into it later, then u have to do some sort of calculation for cgt, i think it needs to meet some time period its rented out requirement if i remember correctly… now if its rent free then no cgt, but thats upto the ato interpretation
The critical issue for you is whether you are claiming another property as your PPR, and whether you want to claim any costs associated with this property as a deduction.
If the answer to both is 'no', then you can consider this property your PPR and avoid CGT.
IIRC you can live outside your PPR for 6 years.
Different factors will apply if you have claimed first home owners' grant - which require you live in the property.
You can’t rent out the ppor before you move in to have it cgt free.
If it was me, I would stay at the son’s place sometimes, get the power in my name, and maintain the current rental as a secondary place of residence, even if it might be the place you spend more time sometimes.Somebody will say this isn’t in the letter of the law.
To that I say the ATO is not concerned with internal family finances of a non commercial nature, and I would not lose a wink of sleep.Perhaps op should better describe their circumstances as, “I have bought a new house which I intend to live in long term. I will also let my son live there rent free. To give his family some space, I will also keep a second place to live that I will rent.”
Yep - this is a private family arrangement and the property is not rented.
Thanks all. My primary place of residence is a rental elsewhere. I am not receiving any 'rent' for the new house.
Send all your mail to the new property, don't claim any expenses related to it and tell them it is your primary residence.
- this
You need to establish that it is your PPR. Get all your details updated including drivers licence
Basic rules
Only one ppor at a time
Can chose on any given day which place is ur ppor
Can rent a place out and have it as ur ppor for up to 6 years as long as lived in 6/12 months b4 hand.
If multiple properties u decide at time of selling which to declare as ur ppor.I think since u own one place only and rent to ur son rent free, and thus claiming no deductions simply put this as ur address, the elec in ur name etc, and do the opposite for ur place. Who would know the difference? Assuming these are geographically in close proximity,
Visit ur son once a week etc to exchange mail.
I’m amazed people are twisting themselves in knots out of a desire to pay tax.
It's not surprising with the amount of state and federal taxes Australians have to pay because they choose to work hard and build wealth.
That is hilarious
Who wants to pay more than they could?If you want to get upset at tax not being paid then pull your head in and look at the biggest dole bludgers Australia supports
How good is not paying tax AND getting public subsidies?
https://www.michaelwest.com.au/the-usual-suspects-oil-and-ga…And you voted for it
https://www.michaelwest.com.au/inside-ruperts-big-aussie-sal…Reap what you sow Australia
corruption theft lies no accountabilityHey look over there a real dole bludger that's not picking fruit that needs another whooping
Michael West is doing some of the best journalism I have ever seen. He deserves the support of every Australian.
I don't want to put anyone, including myself, into a position of fudging the truth. Not worth the stress.
Absolutely agree.
Much more stressful to have to pay CGT in my opinion, when it is not required.
I think that you will be better off seeking professional advice. As far as I understand, primary residence exemption has a number of conditions which would prove a property is your primary residence. Most importantly this is triggered only when you have moved in and established your residence. Merely moving in with an intent of moving out again may not be sufficient. If you have genuinely established your primary residence, then you can stay away for up to six years and still claim it as your primary residence.
Based on your statements that this is your first property, if you have received an first home owner concessions or grants from your state government, then usually they will need you to move in within a set time after settlement, and then require that you occupy the property as your principal place of residence for 12 months. Please check with your conveyancer. If your son is not part owner of the property, having his family living in rent free is not sufficient. Tax legislation can be confusing, seek advice before you commit to a arrangement.
If you were actually living in the property, obviously you wouldnt trigger GCT when you sell.
Even though you are not receiving any rental income, you are not living there so technically, when you sell, GCT would apply from the time you owned the property until the time you moved into it.
You could get an independent valuation when you do move in, let the valuer know why you want it so they can make it at the lower end. Then if you do sell, you are only liable for GCT on the buy price and the valuation on the date you actually occupy it, less expenses incurred.
It is much simpler to change your driving license and electoral roll registered address to the property now, consider this property as your PPR and forget all about CGT.
Gapital Cains Tax
More seriously though I don't think valuations come into it. It is only calculated on buy and sell price, divided by the amount of time it wasn't occupied. Eg if you lived in it for 2 years and didn't live in it for 1 year and sold it for a 45,000 profit then you'd pay CGT on 45,000/3=15,000
That's what I thought, but maybe there are 2 options. Meho2026 sounds confident in his advice.
If you have used the property for income producing purposes before you moved into it then the years are just divided up when you sell.
If you lived in it before it became used for income producing purpose and then the cost base for calculating CGT is the value when you move out.
The OP isn't using the property for income producing purposes but isn't living in it either so its not clear cut.
I was trying to be helpful and only making a suggestion that this something the OP could do. I didnt say they must do it.
If they did get a valuation it might help them at sale time lower their CGT liability if there is any dispute.
I could be completely wrong but I dont care cos this is ozbargain not the ATO.
Hahahaha do you really think they will leave hahahahaha
You should have set a president by making them pay a rent with bond. Now they think daddy is a pushover. If they ever get in trouble… good old daddy will bail us out.I am so sorry to have caused discord. As some have suggested, I have emailed my accountant with the question.
Le Peck.
If it is your primary place of residence, no CGT.
If any time it is rented/as investment, when you do sell that period would attract CGT, can get complicated if you do this, check with your accountant before doing this.