Capital Loss on Owner Occupied Property

cryptonoob on 21/03/2023 - 20:36
Last edited 23/03/2023 - 13:29 by 1 other user

I have recently sold my apartment property at a loss unfortunately and moved to my wife's property. I have been told by friends that owner occupied properties are not eligible for claiming capital loss but when I read the ATO website it's a bit unclear.

ATO mostly talks about capital gain event and advising on how to be exempt from paying tax, in my case I don't want to be exempted as I want the loss to offset future gains if that make sense.

I am thinking of claiming the loss this year and telling ATO I have other main residence and the sold property was used for work to generate income, not sure if that's how it works so I want to hear from OzBargains experts.

Thanks guys!

Edit 1: I am not thinking of fraud, lots of false assumptions in the comments but I know you guys have lots of knowledge in this so I just wanted to know what my options are, that's all, thanks again!

Edit 2: Thanks for all the comments, especially caramellokoala for pointing out the actual rules for capital loss, it has nothing to do with PPOR / main residence to begin with. I will confirm with an accountant in EOFY but it definitely felt a lot more difficult than expected to get an answer from this community but still thanks to you all! Have a good one.

Edit 3: Thanks to mungas as well for coming in and providing some advice as a tax specialist! Again it's different to all the other advice which I will be confirming with one or more accountants just to make sure I am doing the right thing.
I think that's pretty much the end of this post, learnt that internet comments can really hurt but the dumpster fire was entertaining in a way.

Financial

Comments

  • Tee Rex Arms on 21/03/2023 - 20:38
    -2

    Your phone autocorrected made a massive profit from the last 2 years to loss

  • Muzeeb on 21/03/2023 - 20:39
    +20

    I have recently sold my apartment property at a loss unfortunately

    Said no one ever since 1992.

    • [Deactivated] on 21/03/2023 - 20:55
      +18

      People overpay or become desperate to sell all the time.

    • cryptonoob on 21/03/2023 - 21:54
      +3

      I thought most apartments are suffering the same.. but sounds like I must be the really unlucky one then.

      • nephilim on 21/03/2023 - 23:43
        +2

        When Chinese students went back in 2021, here in Adelaide, like 90% of apartments dropped 50k in a few months.
        Opposite issue of late 2022, no one wanted them, now there is a housing shortage.

        • AustriaBargain on 23/03/2023 - 05:50

          When Chinese students left a friend of mine decided to just move into his apartment. He figured what's the point of paying so much for an apartment in a big city tower if you never get to enjoy the view.

    • idonotknowwhy on 22/03/2023 - 09:18
      +10

      I know someone who bought an apartment for just under 600k in 2019, and sold it for $320k during the pandemic.
      I wish they'd told me they were going to sell it for that price first lol

      • Seraphin7 on 22/03/2023 - 11:20
        -1

        User name checks out.

    • HeWhoKnows on 22/03/2023 - 10:47
      +14

      Its pretty straight forward

      Was the property an income earning asset on which you paid income tax - NO !!!!
      So there is your answer in ONE.

      Your home is just that.
      You dont pay taxes on the capital gain when you sell it
      hence you dont claim a capital loss either.

      You cant have it both ways OP

      • cryptonoob on 22/03/2023 - 13:07
        -7

        Yeah I think I've sorted it out as soon as someone was willing to point it out for me.

        But you're talking like capital gain and loss share the same rule, I totally thought the same initally.

        The problem with your logic:

        Say if you own 5 properties, none of them were income earning asset (Wife lives in one, Dad lives in one, holiday home etc etc)
        When you sell all of them for profit do you pay capital gain? The answer is YES?

        When you sell all of them for loss can you claim capital loss? The answer is NO?

        • Drakesy on 22/03/2023 - 16:21
          +3

          OP There's a difference in taxation between your Primary place of residence and investment properties…

          PPOR is not subject to any tax benefits as there's nothing taxable on it, it's exempt from CGT.

          Your main residence (your home) is exempt from CGT if you are an Australian resident and the dwelling:
          has been the home of you, your partner and other dependants for the whole period you have owned it
          has not been used to produce income – that is, you have not run a business from it, rented it out or 'flipped' it (bought it to renovate and sell at a profit)
          is on land of 2 hectares or less.
          If you meet these conditions, you do not pay tax on any capital gain when you sell your home and you ignore any capital loss.
          If you do not meet all these conditions, you may still be entitled to a partial exemption. You can work out the proportion that is exempt using the CGT property exemption tool.

          • cryptonoob on 22/03/2023 - 16:52
            -3

            @Drakesy: Hmm you are absolutely correct on defining Primary place of residence and investment properties, but what does that have to do with the question?

            • Drakesy on 22/03/2023 - 17:30
              -1

              @cryptonoob:

              Hmm you are absolutely correct on defining Primary place of residence and investment properties, but what does that have to do with the question?

              Yours is a PPOR and therefore not subject to CGT or any tax deductions as a result of losses on the sale of the property?

              • cryptonoob on 22/03/2023 - 17:59
                -1

                @Drakesy: Hey mate, again you haven't read the post and edits.

                The question has been answered already, my property is not subject to capital loss but not for the reasons you specified.

                You shouldn't be focusing on PPOR, because as you have quoted above, it has not been the home of me, my partner and other dependants for the whole period I have owned it.

          • HeWhoKnows on 23/03/2023 - 09:50

            @Drakesy: Thx for clarifying yet again for OP
            Let OP try claim the illegitimate capital loss against something and have the tax office land him in gaol for tax fraud..LOL

            • cryptonoob on 23/03/2023 - 21:57
              +1

              @HeWhoKnows: Sigh, like I have been saying over and over again. If it is illegitimate then it will not be claimed.

              It's not okay to be so mean and rude to people just because you are on a forum.

              I know you have your assumptions or you just enjoy abusing people but if you have doubts you could've asked the question instead of saying send me to gaol..

              • HeWhoKnows on 26/03/2023 - 19:35
                -1

                @cryptonoob: Thanks for your reply
                Its not about anyone here being mean and rude

                its about you harping on and on about how you have must have a legitimate claim to a "non-income earning" tax loss.
                You wont take NO for an answer
                You want to argue with everyone

                No stop arguing and go away please

                Maybe when you end up in gaol you can post how not to argue with the OB community

                • gimme on 29/03/2023 - 13:42

                  @HeWhoKnows: Not taking no for an answer and doing something illegal are 2 different things. People who accept the first/second etc NO generally fail in life or at best miss out. From personal experience, there's been many many occasions where I've politely and persistently pushed for something and haven't accepted the easy/lazy/ignorant no it can't be done. Guess what, vast majority of the time I got it done or found a solution (and perfectly legal).

                  On a sidenote - Ozbargain is full of 'law abiding' citizens with a black and white outlook on life and low on critical thought - so not the best place to get nuanced and educated opinions. There are some highly intelligent commenters though which are pretty easy to spot if you know what you're looking for :)

    • Bob Svargis on 22/03/2023 - 17:12
      +2

      Not really. Property isn't the straightforward "guaranteed to make money" investment that the media would have people believe. Anyone who held an apartment and tried to sell over or just after the GFC would be aware of this.

    • JumperC on 22/03/2023 - 22:51

      Almost every new apartment declines in value in the first few years of ownership, outside Sydney and parts of Melbourne a fairly high % of apartments have depreciated most years of the last decade. And that's before you consider selling costs etc.

      The fact that apartments in Sydney actually increased in value significantly is the anomaly.

      Land appreciates, buildings depreciate. It takes pretty insane and historically unusual land price growth for apartments to not do worse than inflation, and we've had very low inflation until recently. If you'd bought and sold an apartment in Brisbane between 2009 and 2019 you'd be a unique case if you didn't sell at a loss. It was only the mass exodus from southern states in the pandemic that bought the first significant price increases in a decade.

      But yes, if you lived in Sydney, few apartments probably lost money (save those with structural defects!).

  • djsweet on 21/03/2023 - 20:41
    +31

    Mmmm tax fraud. Spicy

    • cryptonoob on 21/03/2023 - 21:42
      -2

      nonono we're not going there!

      • SF3 on 21/03/2023 - 22:24
        +11

        "If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck"

  • deme on 21/03/2023 - 20:50
    +5

    🍿

  • plmko on 21/03/2023 - 20:56
    +20

    So basically you want your cake and eat it too.

    • Ghost47 on 21/03/2023 - 21:37
      +35

      This is basically every Australian who owns property. Privatise profits, socialise losses.

    • cryptonoob on 21/03/2023 - 22:06
      -2

      It's more like I lost my cake and can't eat it too :(

      • Drakesy on 23/03/2023 - 10:54

        There wasnt any cake to start with

  • JimmyF on 21/03/2023 - 20:58
    +30

    I have been told by friends that owner occupied properties are not eligible for claiming capital loss but when I read the ATO website it's a bit unclear.

    Your friends are correct, and the ATO is clear on this as well. Your PPOR is exempt from CGT. That goes both ways, profit or loss.

    I am thinking of claiming the loss this year and telling ATO I have other main residence and the sold property was used for work to generate income, not sure if that's how it works so I want to hear from ozbargains experts.

    So tax fraud…. Do you have proof it has generated income? Did you claim said income in other years on your tax return?

    no and no, red flags everywhere. Hello ATO audit.

    Accept your loss, move on with life.

    • cryptonoob on 21/03/2023 - 21:41

      Definitely not thinking of tax fraud here like everyone is suggesting, genuinely asking after reading the ATO website and I will ask my accountant when it comes to EOFY.

      I didn't claim the said income but I have been claiming WFH / home office since covid happened, however I have been living in 2 other properties, and I thought you can only have one PPOR, and only that property is exempt from GPT?

      I am happy to accept my loss, it is what it is but I just want to know what people think, and I know now :)

      • Drakesy on 22/03/2023 - 16:23
        +1

        My advice,
        Stop looking for confirmation bias and just accept what the trusty accountants of Ozbargain have said.

        • cryptonoob on 22/03/2023 - 16:50
          -7

          You probably didn't have time to go through the entire post and read my edits, but most people here pretty much provided the wrong information and accusing me at the same time.

          But I do appreciate all the different opinions.

          • Drakesy on 22/03/2023 - 17:33
            +2

            @cryptonoob: You've literally ignored perfectly good advice that doesn't suit your narrative.
            The number of times its been answered is astonishing.

            • cryptonoob on 22/03/2023 - 17:44
              -1

              @Drakesy: Which good advice did I ignore? I took all the good advice and thanked pretty much every single person.

              You, not so much unfortunately.

      • od810 on 23/03/2023 - 19:04

        Here is the test:

        • did you buy the property with the intention to generate income (through cap gain, rental income)

        Tax in australia is based on trust, you can declare what ever you want. But wrongful claim is tax fraud, you might get away with it but if get audit, good luck

  • Peza on 21/03/2023 - 20:59
    +7

    Sorry to be the bearer of bad news, but you cannot claim your loss on a principle place of residency as a capital loss, and subsequently offset any future capital gains.. just like any gain on PPR does not form a capital gain.

    This is assuming you have never rented the property out, it has been your principal place of residence, and it’s in your personal name(s). Other factors ‘might’ open the door to some apportionment of loss or if ownership under a business/company.

    Your concept that you will offset the loss with a future gain won’t be accepted .. and carefull what you wish for as the concept would mean all of any future gain would be assessable, not just the offset amount.. it’s all in or none.. and I personally would take keeping my PPR away from any tax assessment.

    • cryptonoob on 21/03/2023 - 22:01
      -2

      Thanks! One of the few useful responses here and I hope you can give me some more advice, just wanna say I am nothing thinking of fraud, some comments are really mean :(

      I have not rented the property out, but it has not been my principal place of residence for the entire period as I lived with my parents for a bit then moved to my wife's place. I have also claimed WFH expenses as I used one of the rooms for work.

      Does this change anything or am I still misunderstanding the rules?

      • Peza on 22/03/2023 - 09:59
        +3

        As many comments here say, if you tried to claim something like this on a tax return, first impressions are that you are claiming something that you have no entitlement too.. there would be tough penalties imposed if caught..

        Simply, a PPOR is not taxed.. and im sure 99.999% of taxpayers would not have it any other way.. you seem to be the 0.001% who made a loss and would like to realise that loss by reduce their tax liability (whether it be now or in future)

        My comment was more that there may be some facts that 'might' allow you to capture the loss. I am no expert on what can be done, so maybe its time for the caveat that a tax agent might help give personalised and professional advice in your circumstances.
        You would need consider how likely it is you can claim anything, compared to the costs a tax agent would charge to look into it for you..

        My observations (and happy to be corrected):
        - During the period you were living there, you cannot claim any loss
        - If there was any period you were not living there, and the purpose of the vacant property was to rent it out, as in actively advertised, (whether you ended up renting or not) and other actions to support this, then you could gather that evidence and see if you have an entitlement. You would know if this occured as you would have records in the year it happened. You would also likely incur additional costs such as getting valuations for the periods in question etc. (tax agent could advise what they think is sufficient)
        - If you chose to leave it empty, maybe made some improvements to it, or if you purchased the property with government support (i,e. first home buyer) and it remained empty for the a required period.. then I don't see you having any entitlement.

        In conclusion, there would be a very limited circumstances that you could 'might' be able to claim the loss.. and i think you would know if any events had occurred to allow for it.

        I hope it helps and good luck

      • PeterSnoot on 22/03/2023 - 10:02

        Short answer is no - it doesn't change anything.

  • mehow on 21/03/2023 - 21:03
    -1

    Couldn't you rent it out?

    • [Deactivated] on 21/03/2023 - 21:29

      Already sold

    • cryptonoob on 21/03/2023 - 22:04
      -2

      Hmm I should've done that actually

  • DashCam AKA Rolts on 21/03/2023 - 21:09
    +5

    I am thinking of claiming the loss this year and telling ATO I have other main residence and the sold property was used for work to generate income

    Fraud.
    Also you also have no proof of this property generating income, which you haven't declared.

  • brendanm on 21/03/2023 - 21:25
    +11

    Haha this isn't even good or clever fraud. Lazy and easily caught fraud.

    • cryptonoob on 21/03/2023 - 21:46

      Yeah I was expecting these responses here, but I just want to say that the reason I am asking is that I want to do it right and legally.

      • brendanm on 21/03/2023 - 23:14
        +2

        You can't claim a capital loss on your ppor, and you sure can't claim that you were renting it out, when you weren't, legally.

        • cryptonoob on 21/03/2023 - 23:31

          Agreed, but the question is am I able to claim a capital loss if it's not my PPOR because I have been living elsewhere, at least a portion while I was absent.
          Problem is I mentioned work and generating income and people immediately jumped to conclusion.

  • SBOB on 21/03/2023 - 21:41
    -1

    I am thinking of claiming the loss this year and telling ATO I have other main residence and the sold property was used for work to generate income,

    back dated to when?
    As you've clearly done previous years tax returns without claiming tax offsets for the property, or declared income from the property, at absolute best fraud case, you would also have to fradulently come up with a valuation from the end of the last FY as to what the actual CGT loss is over that period of not being your PPOR is

    Or, in summary…. nup

    • cryptonoob on 21/03/2023 - 21:52
      -1

      Hmm right, I have not declared income but I have always declared WFH expenses which doesn't help in this case I guess.

      I have not lived in that property for about a year as my PPOR changed, so I am still not sure why it would be a fraud (I am really bad at this) but all good thanks for the info!

      • CGradeCyclist on 23/03/2023 - 10:26
        +1

        I think the WFH claim works against you. If you have claimed saying you're 'working from home', it makes it hard to say that the apartment wasn't your PPOR (ie your home). Might be one of those things that triggers an ATO audit… Interesting question though. :-)

  • KaTst3R on 21/03/2023 - 22:19

    Rental income makes it obvious it is an investment property.

    But according to the ATO an investment property can also be a holiday home which is able to be rented out but is not. No deductions allowed obviously if there is no income on this. However, I dont see why you cant declare this as your holiday home.

    If the amount is large, it is worth spending some money on a tax accountant.

    Im just assuming that your name is on your wife's property also so you can declare that PPOR. If you only have 1 property under your name then there is no way to claim investment property.

    • cryptonoob on 21/03/2023 - 22:32

      lol this holiday home concept is interesting, unfortunately it was actually vacant for a long period.

      Now when I think about it, if I have rented it out things would be much easier now.

  • thedeep on 21/03/2023 - 23:18
    +1

    I know a lot of the others here are suggesting "tax fraud" etc, however the Main Residence Exemption has to be claimed. In theory there should be no issue in not claiming the exemption.

    Just because you don't rent out a property doesn't mean it is a Main Residence for which the exemption applies. The obvious case is a holiday home where you may never rent it out, but you still need to pay Capital Gains Tax.

    It sounds like you have multiple properties, so you should be able to choose which one to apply the Main Residence Exemption to.

    Speak to your accountant, because it may be possible to offset the capital loss against future gains.

    • cryptonoob on 21/03/2023 - 23:41

      Thank you, thank you and thank you for actually answering my question and being kind and sensible!

      Will be asking an accountant when the time comes. Please let me know if you have any recommended accountants to deal with these enquiries!

      • thedeep on 22/03/2023 - 00:23

        Most accountants should be able to help with this.

        BTW the loss (for tax purposes) may be bigger than you have been calculating, because you are usually entitled to add any costs where you haven't previously claimed a tax deduction (for example mortgage interest or strata fees) before calculating profit or loss for Capital Gains Tax purposes.

        It would be worth spending the money for good advice.

    • Trekky on 22/03/2023 - 09:10
      +2

      Op says above that he lived with his parents then moved in with the wife. And doesn't mention if the place where his wife lives is in both their names. So, to me it sounds like was his only property.

    • caramellokoala on 22/03/2023 - 10:00

      Why even comment if you have no idea what you are talking about?

      In order to claim a capital loss on an asset it must be an income producing investment i.e rented out at some or all of its ownership period.

      the OP stated that he has never rented out the property so it has never been an income producing asset so no capital losses can be claimed.

      I have no idea why you are even talking about the "Main Residence Exemption" because that only relates to A CGT event

      • thedeep on 22/03/2023 - 20:43
        +1

        This is not true.

        The reverse is true. By default if you buy or sell an asset you have to pay CGT. You don't pay CGT on a Main Residence because of the Main Residence exemption.

        So if you buy a second property, you still have to pay CGT (which means you also have CGT loss) regardless of whether you rent it out or not.

        You only need to have an income producing asset if you want to claim tax deductions for the costs of keeping that asset.

      • bman20 on 23/03/2023 - 17:10

        I love it when someone speaks with such authority, shutting down others when they themselves are clueless.

        What you have said is untrue. Income is immaterial. If you have a holiday home (not your PPOR), you will need to pay tax on any capital gain and any capital loss can be carried forward to offset future capital gains.

      • fersea on 23/03/2023 - 20:41

        You are continually getting confused between an asset that you can claim net rental losses and a capital gain / loss event.

        There are occasions where you can claim net rental losses and be exempt from CGT and similarly there are properties where you can’t claim expenses but the disposal is a capital gains event.

  • Donaldhump on 21/03/2023 - 23:51

    just say you have a house in kazaksthan which is your PPOR over there and so as to not trigger a capital gain there you need to make this one not your PPOR.

    in all honesty doubt you can, sort of sucks though

  • Lunarboogie on 22/03/2023 - 09:09
    +2

    I can see that OP is at pains to claim he is neutral but the fact that he's considering this option is indicative of his motives. OP rolled the dice on this purchase, hoping to make a gain which he would have personally pocketed. Yet when that failed he thinks tax payers ought to subsidise his losses. You can't walk two sides of the same street. The residence was never an OP under ATO definitions and while you may find a crafty accountant to make it so, he'll likely be dealt with at some point by the pointy heads.

    • JimmyF on 22/03/2023 - 09:19
      +1

      The residence was never an IP under ATO definitions

      Correct, I'm sure the OP also forgot to pay 'land tax' on their investment property too the entire time they owned it as well :)

      Yet when that failed he thinks tax payers ought to subsidise his losses

      We have a lot of this view over covid as well. If you are winning its all mine, if you are lossing, then the taxpayer needs to cover it. I'm looking at you Qantas!

    • Muzeeb on 22/03/2023 - 09:26
      -1

      You can't walk two sides of the same street.

      Maybe OP is walking down this street. At 31cm wide it's quite possible.

    • fersea on 23/03/2023 - 20:47

      The OP is not required to be neutral. He is entitled to have as low a tax liability as is allowed by the law.

      Your comments are based on your opinion, not taxation law.

  • JIMB0 on 22/03/2023 - 09:18
    +2

    If you sold for a profit were you going to declare the capital gain?

    • ThithLord on 22/03/2023 - 09:33
      +1

      Ofc, OP is a good Australian citizen

    • cryptonoob on 22/03/2023 - 09:47
      +1

      Sigh, again the problem is we have two properties and ATO says we need to choose which one is our main residence, is it really that hard to explain it?

      So if our second property (I am now living in) sold for a loss, can we then claim a capital loss? Or is it again a tax fraud?

      Are we saying all properties I own can never be sold for a capital loss if it was never rented out?

      • CodeXD on 22/03/2023 - 09:48
        +3

        You need to talk to an accountant about this.

        • cryptonoob on 22/03/2023 - 10:02
          +1

          Yeah 100%!

          I am just throwing this question out because I noticed they don't know what they're talking about and just making fun of my loss, which is totally fine this is ozbargain at the end of the day. :)

          • gimme on 23/03/2023 - 05:14

            @cryptonoob: Ask the question but ignore the 99% morons on here. You'll typically get a couple of thought out expert responses.

      • caramellokoala on 22/03/2023 - 10:07
        +2

        Are we saying all properties I own can never be sold for a capital loss if it was never rented out?

        Correct. Unless it is an income producing asset(i.e. rented out) you can't claim a loss(regardless of what you nominate as your main residence)

        • cryptonoob on 22/03/2023 - 10:13

          If we are saying I can't claim loss on both properties, then we are saying we avoid paying capital gain as well.

          From google: Only your main place of dwelling will be exempt from CGT. Thus you can't own two properties, live in one for a couple of years and then alternate between that property and your main residence while avoiding paying CGT on both houses.

          • caramellokoala on 22/03/2023 - 10:31
            +3

            @cryptonoob: Why are you talking about capital gains now?

            Did you you make a gain or a loss?

            CGT is applicable on everything other than your PPOR, a capital loss is only applicable to income producing assets as I said above.

            • cryptonoob on 22/03/2023 - 10:46

              @caramellokoala: I made a loss, but people keep saying gain and loss apply the same rules so I am just throwing a different question.

              If what you’re saying is true then I see where all the misunderstanding comes from, they were never the same to begin with!

              Thanks mate

              • caramellokoala on 22/03/2023 - 10:53
                +1

                @cryptonoob: They don't.

                Everyone here who is talking to you about "Main residence" is a moron. It has nothing the do with a loss event, its about CGT exemption. Ignore them.

                All you need to worry about is "was my premise rented for all or any time of my ownership" if the answer is "No" then no capital loss provisions apply to you

        • md333 on 22/03/2023 - 12:34

          Are you saying holding property speculatively for capital gains is not considered an income producing asset unless rented out? Have you got an ATO reference for that? Seems like a huge loophole if it applied to gains, and the same rules should apply to losses as gains.

          • cryptonoob on 22/03/2023 - 12:54
            +1

            @md333: He's saying whether or not it is an income producing asset capital gains will always apply unless it is your main residence.

            Capital loss has very different rules and it only applies if it is an income producing asset.

            That's my understanding now and if that's correct I don't see a loophole because ATO wins in all situations. :)

            p.s. I am also trying to find reference but again, ATO only focuses on capital gain which makes it very hard.

          • caramellokoala on 22/03/2023 - 12:59

            @md333: It must be rented, offered for rent or repairs being made to make it fit for habitation.

            Basically all the same rules for when you can negatively gear a property.

            https://www.ato.gov.au/Individuals/Investments-and-assets/Re…

            • md333 on 22/03/2023 - 13:13

              @caramellokoala: That article is very specific to rental expenses, not capital gains/losses. What makes you say the same provisions apply to capital gains? Just because it doesn't make sense doesn't mean it isn't true, but would be good to indicate why you believe that to be the case.
              CGT on a non rental non PPOR property seems to fall outside the obvious guidance on the ATO page. Might be worth contacting them if you think the loss during the periods you weren't living there is significant.
              The capital gains tax calculator specifically says it doesn't apply to moving out of a PPOR and not moving back in, but doesn't really say what does apply.
              https://www.ato.gov.au/Calculators-and-tools/Capital-gains-t…

              • caramellokoala on 22/03/2023 - 13:41

                @md333:

                That article is very specific to rental expenses, not capital gains/losses

                No it is specific to when a house is defined as an "investment" in the eyes of the ATO.

                • md333 on 22/03/2023 - 16:26

                  @caramellokoala: How do you figure that out? It is specifying the requirements to claim deductions for expenses for a rental property. It is in the rental properties section. It is clearly applicable to what ATO consider a rental property. What makes it applicable to non-rental properties?

                • darkchoc on 24/03/2023 - 07:47
                  +1

                  @caramellokoala: There's a lot of mixing up income tax vs capital gains tax. 2 very different taxes with different rules.

                  To claim income tax deductions, yes, it has to be a rental property.

                  To claim CGT relief (on gains/losses), it must be a PPoR.

                  Property can be non-incoming producing and also be non-PPOR, resulting in no allowance for income tax deductions and still be subject to CGT.

                  For example:
                  - holiday home
                  - a second home that you don't live in
                  - crypto (yes it's considered property)

                  What is important is to keep records to prove what period of time the property was a PPoR and what period of time it was not.

      • Hearthstone on 22/03/2023 - 10:10
        +1

        you cant just arbitrary declare and pick which is your PPOR, it has to be evidence based which supports that claim
        ATO has plenty of information on it

        https://www.ato.gov.au/Individuals/Capital-gains-tax/Property-and-capital-gains-tax/Your-main-residence-(home)/Eligibility-for-main-residence-exemption/

        What is a main residence?
        Generally, a dwelling is considered to be your main residence if:

        you and your family live in it
        your personal belongings are in it
        it is the address your mail is delivered to
        it is your address on the electoral roll
        services such as gas and power are connected.
        The length of time you stay in the dwelling and whether you intend to occupy it as your home may also be relevant.

        To be your main residence, your property must have a dwelling on it and you must have lived in it. You are not entitled to the exemption for a vacant block.

        • cryptonoob on 22/03/2023 - 10:21

          Nice! That's what I have been reading about too.

          2017 - Bought property but I was still living in parents property
          2018-2021 - We moved into property A
          2021-2022 - We moved into my wife's place, property B
          2023 - Sold property A

          I am just confused why everyone thinks the property I sold has to be my PPOR? Shed some light please :)

          And I know when we sell property B and if we sell for a loss, if I ask the question here people will then say property B is my PPOR, therefore can't claim loss either.

          • Hearthstone on 22/03/2023 - 10:37
            +1

            @cryptonoob: you can claimed a portion of the time it wasn't your PPOR but you got to have documents or some proof
            claimed tax loss and gain are proportional

            is the properties in join name or under each individual name which properties under what name?
            talk to your accountant or tax advisor, this is borderline grey area you got to have concrete evidences

            • caramellokoala on 22/03/2023 - 11:01

              @Hearthstone: No he can't because when it wasn't his PPOR it wasn't rented out so it can't be claimed as a loss.

              Why offer advice if its completely wrong?

              • Hearthstone on 22/03/2023 - 11:19

                @caramellokoala: of course he can when he bought it in 2017 as an investment has not moved into it until 2018
                there is pro-rata calculation for profit and loss when converting investment properties to PPOR and vice versa

                so he got to has valuation on properties at different time he move in and out that why I said he need documentation

                https://community.ato.gov.au/s/question/a0J9s000000NW6AEAW/p…

                • caramellokoala on 22/03/2023 - 11:55

                  @Hearthstone:

                  of course he can when he bought it in 2017 as an investment has not moved into it until 2018
                  there is pro-rata calculation for profit and loss when converting investment properties to PPOR and vice versa

                  Its not an investment, it has never been offered for rent and OP has no proof he was offering it for rent during this period.

                  https://community.ato.gov.au/s/question/a0J9s000000NW6AEAW/p…

                  You're making yourself look stupid referring to a CGT example. Is this a capital gain or loss OP is talking about? They are completely different under tax law.

          • Lunarboogie on 22/03/2023 - 11:20

            @cryptonoob: If property B is in your wife's name and not yours, there is no need to include it here. Other than for the sake of obfuscating the process in the hope of identifying a loophole to enable tax payers to subsidise your failed real estate endeavours.

            If you could do this, a renter, squatter or plain interloper could claim Joe Blow's joint as their PPOR and avoid taxes. Just stump up and take the loss.

            • Hearthstone on 22/03/2023 - 11:28

              @Lunarboogie: correct that is why I ask what properties under what name etc…
              if A under his name and B under wife name then it got nothing to do with B

              his only narrow window is 2017-2018 as investment properties but he need
              valuation in 2018 when he moved in as PPOR if there is no loss there then he is out of luck

              • cryptonoob on 22/03/2023 - 11:49

                @Hearthstone: All good! Landed on not claiming anything but the different name thing is now bothering me lol!

            • cryptonoob on 22/03/2023 - 11:47

              @Lunarboogie: Yeah will take the loss as others suggested but I am now curious and confused very about what you just said.

              Of course a renter can't claim other people property as their PPOR, but aren't married couple treated as one family?

              If we read the statements below, does it matter which property is in whose name?

              From Google:
              Spouses are only entitled to one main residence exemption for CGT purposes between them. If each member of a couple owns a main residence they must either:
              - select one residence for the exemption during the period they are together, or
              - apportion the CGT exemption between the two residences

          • Needausername on 22/03/2023 - 17:54
            +1

            @cryptonoob: There are a number of factors that indicate whether a property is no longer your main residence:

            • you and your family no longer live in it
            • your personal belongings are not kept in it
            • it is no longer the address your mail is delivered to
            • it is no longer your address on the electoral roll
            • services such as gas and power are no longer connected.

            2021 - 2022 onward is no longer your PPOR. You can claim the loss from that time onward. 2 options to calculate your loss, either proportion method (time not your PPOR / total time own) or actual loss since the property is no longer your PPOR (you can only use this method if you have actual document to support it, such as a valuation)

  • Hearthstone on 22/03/2023 - 10:04

    you can only have one PPOR

    the fact that you have 2 properties what determines your PPOR is the amount of time you spend there, your mail or bills get sent there for official purposes, WFH claim further add to the evidence that that is your PPOR not the other way around.

    on that account it is your PPOR, declaring anything otherwise is a fraud

  • pjetson on 22/03/2023 - 10:06

    If the property is not the OP's PPoR, then isn't it just an asset like any other? If the OP sells it at a profit, they would have to pay tax on the capital gain. So, if they sell it at a loss, they would have a capital loss.

    If the property was used to generate income, then some of the costs of the property could potentially be written off against that income. However, it doesn't sound like it was income-producing.

    Also, my understanding is that you can't "claim a loss" in that you get something back in your tax return, you can only use the capital loss to reduce any capital gains you have made in the current or future years.

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