Move from Principal Place of Residence into New House That I Buy

• 

  tsunamisurfer on 05/03/2021 - 14:41

  At worst you will be liable for a CGT on the portion of the time it was not a PPOR.

  Ie 5 years of 25 years of ownership less 50% CGT discount.

  You could try to invoke the CGT 6 year rule.

  https://duotax.com.au/capital-gains-tax-property/

  • 

    Meho2026 on 05/03/2021 - 15:33

    +1

    6 year rule doesn’t apply if you buy another property and live in it

• 

  SF3 on 05/03/2021 - 14:48

  Your current house - you should do a valuation, as the CGT would be calculated from the day you move out until the day you sell it.

• 

  CrowReally on 05/03/2021 - 15:32

  Your advisor will confirm but:

  1. You can only have one Primary Place of Residence (PPR) at a time
  2. You can nominate which place is your PPR
  3. The 'six year rule' for renting ties in with PPR, theroetically old place should be able to continue same PPR nomination and be sold without CGT issue
  4. That means first 5 years of ownership of your new place will NOT have PPR nomination on it. Then, after selling old home, you move PPR nomination to new home.
  5. If you sold your new home 2 years after that point in time, you would calculate CGT on the entire disposal and 5/7ths of that amount would be assessable income [5 non-PPR years in new house / 7 years total ownership]. The 50% CGT discount for >12 months ownership would apply as well.
  • 

    Meho2026 on 05/03/2021 - 15:46

    -2

    I don’t think that’s correct.
    The new home becomes the PPR the minute you move your possessions into it, receive mail there, connect utilities etc.
    You don’t get to nominate which property is your PPR. The ATO does that based on what is your main residence.
    The only time you are allowed to claim two PPR is when you buy a new home before selling the old one and there is a 6 month limit on that and neither property can be used to derive an income.

    • 

      CrowReally on 05/03/2021 - 15:48

      Thank you for speaking politely, but my answer was nevertheless correct: https://www.ato.gov.au/general/capital-gains-tax/your-home-a…

      • 

        Meho2026 on 05/03/2021 - 15:53

        -3

        I was trying to be polite before. It doesn’t come naturally.
        You are wrong.
        Stop advice on things you know nothing about
        The link you provided clearly states a caveat to the rule
        “ can't treat any other dwelling as your main residence for that period”

        • 

          CrowReally on 05/03/2021 - 16:00

          @Meho2026: Yes, that caveat was what was covered by my points 4 and 5 in my original post.

          If you scroll down that link I posted the ATO has done worked examples 6, 7 and 8 that matches the OP's situation.

          They confirm that I am correct.

          • 

            Meho2026 on 05/03/2021 - 16:21

            @CrowReally: ok
            So I’ve reread what the OP wrote

            I thought he’s asking about paying CGT on the first property when he sells it.

            I think you’re thinking he’s asking about CGT on the second property if he sells that after 5 years.

            I think what OPs actually saying is in 5 years he will sell the first property. Then way down the track, in another 20 years, his remaining property, the second one, that’s always been his PPR, is it liable for CGT?

            The answer is no and we’re both wrong

            • 

              CrowReally on 05/03/2021 - 16:27

              -1

              @Meho2026: I was about to get out the red pen and mark your "Comprehension" section of the exam, so I'm glad you decided to reread a few things (including the original post).

              I did indeed take "What happens with the new house when I sell it???" to be a question about the second house. I'm not sure this is as ambiguous as you think it is.

              I can appreciate you're both confused and wrong, and respectfully decline your offer to be categorised as either alongside you.

• 

  Meho2026 on 05/03/2021 - 15:50

  To answer your original question.
  You can either do what SF3 said and get the old property valued before you rent it out and use that as a cost base or what tsunamisurfer said, apportion the time it was used as investment against the total period of ownership

  • 

    CrowReally on 05/03/2021 - 16:02

    -1

    "Updating" your cost base for market value on the date you moved out is entirely incorrect.
    Stop talking about things that you don't know about. If there's a rule that would permit this, post it.

    • 

      Meho2026 on 05/03/2021 - 16:28

      OMG
      https://www.ato.gov.au/General/Capital-gains-tax/Your-home-a…

      Example: Home becomes a rental property
      Erin bought a house in July 2000 for $280,000. The house was her main residence until she moved into a new house on 1 August 2003. On 2 August 2003, she began renting out the old house. At that time, the market value of the old house was $450,000.

      Erin did not want to treat the old house as her main residence under the ‘continuing main residence status after moving out’ rule as she wanted the new house to be treated as her main residence from the date she moved into it.

      On 14 April 2020, Erin sold the old house for $696,000. Erin is taken to have acquired the old house for $450,000 on 2 August 2003 and calculates her taxable capital gain to be $246,000.

      • 

        netjock on 05/03/2021 - 16:50

        +1

        Guess it also depends on what OP intends to do with the new house.

        Getting tax advice from OzB. Bounds to save $69 but might lose thousands in tax to the ATO.

• 

  vegemite2008 on 05/03/2021 - 20:33

  Thanks for the comments.

  I believe Crowreally is correct.

  Just needed some 'crowd brain storming'.

  Thanks everyone.

  • 

    CrowReally on 06/03/2021 - 13:24

    -1

    No worries - though like I said to start with, I defer to whatever the advisor suggests.

    To make the example easier to visualise when discussing it with them, you might want to represent the concepts visually - draw a long line on a piece of paper and label it with a few years, then above it draw a line showing when the original house will be owned and then above that another line when the new house is bought - it shows the overlap of ownership, you can scribble a few values on there [original price]