A complete guide to Capital Gains Tax

The thing about property investing is that eventually you, or your beneficiaries if you hold for the extremely long-term, will likely have to pay Capital Gains Tax (CGT).

This is the time when the Federal Government gets their share of the profit that you’ve made from investing in property as it’s technically classed as personal income.

So, in this article we’ll outline what CGT is, how to minimise it, and how to calculate it, so no one’s surprised when the taxman (or woman) comes a-calling.

What is Capital Gains Tax?

What-is-capital-Gains-Tax-200x300

Capital Gains Tax was introduced in Australia in 1985 and applies to any asset you’ve acquired since that time unless specifically exempted.

According to the Australian Tax Office, a capital gain or capital loss on an asset is the difference between what it cost you and what you receive when you dispose of it.

You pay tax on your capital gains, which forms part of your income tax and is not considered a separate tax – though it’s referred to as CGT.

If an asset is held for at least one year, then any gain is first discounted by 50 per cent for individual taxpayers or by 33.3 per cent for superannuation funds.

Capital losses can be offset against capital gains, and net capital losses in a tax year may be carried forward indefinitely.

However, capital losses cannot be offset against normal income.

According to the ATO, most personal assets are exempt from CGT, including your home, car, and most personal use assets such as furniture. CGT also doesn’t apply to depreciating assets used solely for taxable purposes, such as business equipment or fittings in a rental property.  

If you’re an Australian resident, CGT applies to your assets anywhere in the world.

Foreign residents make a capital gain or capital loss if a CGT event happens to an asset that is ‘taxable Australian property’.

When you sell or otherwise dispose of an asset it’s called a CGT event, which is the moment when you make a capital gain or capital loss.

It’s also important to establish the timing of a CGT event because it tells you in which income year to report your capital gain or capital loss, and may affect how you calculate your tax liability.

If you dispose of a CGT asset, the CGT event usually happens when you enter into the contract for disposal.

In the case of real estate, for example, the CGT event generally occurs when you enter into the contract – that is, the date on the contract, not when you settle.

How much is Capital Gains Tax?

The vast majority of people pay Capital Gains Tax on a rental property when they sell, or dispose, of it, so it’s important to understand how CGT is calculated.

CGT can be a little tricky to calculate, that’s why it’s so important to have specialists on your side – and especially a good taxation accountant.

Remember CGT is only payable in the financial year in which you sell or dispose of your rental property.

So, if you follow a long-term wealth creation strategy you won’t need to worry about paying this for many years or possibly decades. CGT (Capital Gains Tax) on Stacked Coins Isolated White Backgrou

In the meantime, you can access any capital growth to grow your portfolio and improve your overall financial position.

For most CGT events, your capital gain is the difference between your capital proceeds and the cost base of your CGT asset – that is, where you receive more for an asset than it cost you.

According to the ATO, the cost base of a CGT asset is largely what you paid for it, together with some other costs associated with acquiring, holding and disposing of it.

If the rental property or asset was acquired before 1985, then no CGT is payable, however,  major improvements to a property since that time may be subject to CGT.

There are three options to calculate your capital gain

You can choose the method that gives you the best result (that is, the smallest capital gain) as long as you satisfy certain conditions.

The three different calculations are:

CGT discount methodHow-Much-is-Capital-Gains-Tax-300x300

For assets held for 12 months or more before the relevant CGT event. Allows you to reduce your capital gain by:

  • 50 per cent for individuals (including partners in partnerships) and trusts
  • 3 per cent for complying super funds.

This is generally not available to companies.

Indexation method

For assets acquired before 11.45am (by legal time in the ACT) on 21 September 1999 (and held for 12 months or more before the relevant CGT event).

  • Allows you to increase the cost base by applying an indexation factor based on the consumer price index (CPI) up to September 1999.

Other method

For assets held for less than 12 months before the relevant CGT event. To determine whether you acquired the asset at least 12 months before the CGT event, exclude both the day of acquisition and the day of the CGT event.

  • Basic method of subtracting the cost base from the capital proceeds.

An example of using the CGT discount method is: calculator coin money save debt

Julie buys a rental property on 1 June 2014 for $300,000 and sells it for $350,000 on 15 July 2015.

As she owned the asset for more than 12 months she is entitled to the 50 per cent CGT discount.

She would need to also subtract the cost base from the capital proceeds, deduct any capital losses, then reduce by the relevant discount percentage.

There are a number of Capital Gains Tax calculators available online so you can work out how much CGT you might have to pay if you sell a rental property.

It’s important, of course, to use a specialist taxation accountant when it comes to time to lodge your tax return for the financial year in which you’ve disposed of the asset.

Avoiding Capital Gains Tax by living in the property

When it comes to property, one of the major exemptions from Capital Gain Tax is if it’s your home or principal place of residence (PPOR).

You can generally claim the main residence exemption from CGT for your home.

To get the exemption, the property must have a dwelling on it and you must have lived in it.

You’re not entitled to the exemption for a vacant block.

Generally, a dwelling is considered to be your main residence if:Property-Investment-Checklist

  • 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, and
  • Services such as phone, gas, and power are connected.

There is also a tax break which you may be able to access if your PPOR becomes a rental property.

There is a special six-year rule, which means that a property that was previously your PPOR can continue to be exempt from CGT if sold within six years of first being rented out.

The exemption is only available where no other property is nominated as your main residence.

What’s interesting about this rule is that if the same dwelling is reoccupied as your main residence, then the six-year exemption resets.

So another six years of exemption is available from the date it next becomes income-producing.

Paying Capital Gains Tax if your main residence is used for business

Advancements in technology mean that more and more people are working either from home or working for themselves.Man Signing Contract

A tax issue that many people find themselves in, however, is that if they work from home or use the home for business purposes, that may trigger some form of CGT.

It’s important to understand that if your employer has an office in the city or town where you live, your home office will not be a place of business, even if your work requires you to work outside normal business hours.

Also if your income includes personal services income, you may not be able to claim a deduction for occupancy expenses.

According to the ATO, it’s important to consider any CGT impacts of claiming your home as a business premise.

To work out the capital gain that is not exempt, you need to take into account a number of factors including:

  • Proportion of the floor area of your home that is set aside to produce income.
  • The period you use it for this purpose.
  • Whether you’re eligible for the “absence” or six-year rule
  • Whether it was first used to produce income after 20 August 1996.

Avoiding Capital Gains Tax with a Self-Managed Super Fund

The ability to borrow money to invest in property, in particular, by using the mechanism of a SMSF has resulted in the number of funds increase rapidly in recent years.

Close to 600,000 SMSFs are now in operation, according to the latest statistics released by the Australian Taxation Office (for December 2015).Avoiding-Capital-Gains-Tax-with-a-Self-Managed-Super-Fund

While people have generally always been able to buy a property through SMSFs, what has changed in the past few years is that SMSFs can now borrow money to do so.

Buying a property through a SMSF should not be the sole reason that someone chooses to set up a SMSF but it can be an option for people who want more control over their super.

Similarly it’s important to not consider buying the property with a SMSF solely as a way to avoid or minimise, paying CGT.

It should work for your long-term investment strategy as well as meet a number of checks and balances for your financial future.

If you do choose to invest in property using a SMSF, the unique ownership structure provides a number of taxation benefits.

If you sell the property once you’ve retired, you’ll pay no capital gains on the property.

There’s also a 33 per cent discount available under the CGT discount method calculation.

Borrowing or gearing your super into the property must be done under very strict borrowing conditions and can present investment risks.

Some of the property risks associated with geared real estate bought via a SMSF include:

  • Higher costs – SMSF property loans can be more costly than other property loans, which must be factored into your investment decision. Home Finances
  • Cash flow– Loan repayments must be made from your SMSF, which means your fund must always have sufficient liquidity or cash flow to meet the loan repayments.
  • Hard to cancel– If your SMSF property loan documentation and contract is not set up correctly unwinding the arrangement may not be allowed and you may be required to sell the property, potentially causing substantial losses to the SMSF.
  • Possible tax losses– Any tax losses from the property cannot be offset against your taxable income outside the fund.
  • No alterations to the property– Until the SMSF property loan is paid off alterations to a property cannot be made if they change the character of the property.

HOW TO STAY AHEAD…

Why not discuss your individual needs & let Ken Raiss, director of Metropole Wealth Advisory, formulate a Strategic Wealth Plan for you, your family or your business?  

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Using our depth of skills in these core disciplines, we adopt a coordinated project management approach and access other specialists as needed to further enhance our integrated advice solution.

Please click here to organise a time for a chat. Or call us on 1300 METROPOLE.

Disclaimer: The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.

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'A complete guide to Capital Gains Tax' have 230 comments

    Avatar

    November 27, 2020 Suzy

    Hi Michael,
    I was wandering if I have to pay capital gains tax. I purchased a property which we rented out then moved into after 18 months. We lived there for nearly 3 years. We then moved out again 4 years ago and rented it out again. I would like to now sell it. So will I pay capital gains?
    Thank you

    Reply

      Michael Yardney

      November 27, 2020 Michael Yardney

      Yes you will be liable to pay CGT – so best speak with your accountant

      Reply

    Avatar

    November 1, 2020 Fiona

    Hi Michael,, firstly thank you for your great website, full of great info. I have a question regarding CGT to my PPOR in Australia. I left Oz 2 years ago to go and I rented my place out. I went back and lived in it for 4 weeks in Feb/March 2020 to paint etc, with the intention to sell it (before the new rule in July 2020), but Covid hit. It’s now rented out again and I am looking to sell it asap.
    Because I have been a carer my only income has been from the rental income in Aus. I have not submitted a tax return in the UK due to no income. I am unclear what my tax residency status is and if I will be liable for CGT when I plan to sell in Feb next year. Any advise is appreciated.

    Reply

      Michael Yardney

      November 1, 2020 Michael Yardney

      Fiona I’m not an accountant, so check with your accountant, but it seems that as you live in the UK you will be caught under the new legislation that came into effect in July 2020 and will need to pay CGT

      Reply

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    October 23, 2020 Shane Denley

    Hi Michael – In 2000 I purchased a house & had my Father live in it. I have been living in USA since 1999 & have no plans to move back to Australia until I retire in 10 yrs.
    2 part questions.
    1. If I sold the property tomorrow what would be my tax burden?
    2. When I return to Australia is there a way I can live in the house for X amount of time to avoid or lower my tax burden when I sell it?
    I paid $200k in 2000 & market value now is $750k
    Thanks in advance

    Reply

      Michael Yardney

      October 23, 2020 Michael Yardney

      Shane – the tax rules for expats like you have changed recently even for sale of the principle place of residence (which this is not) so best to seek expert advice.
      THis has not been your PPOR so no reason why you should be exempt of CGT for the period you’ve been overseas and living in the property for a short time in the future is unlikely to make a significant difference

      Reply

    Avatar

    October 19, 2020 Leni G.

    Hi Michael, we are planning to buy a property and renovate/extend it as it’s quite old and it’s easier to get most of it sorted before moving in (if possible we’d move in once this is completed). We might sell the house eventually but it’s not our intention to flip and sell. I understand that to be exempt from CGT a home needs to be your main residence and you have to have lived in it while the renovations have been done. Do you have to live in your new home before the renovations have started or could you move in at a later point in time (still within the renovations period) to qualify for the exemption? What if you move in for a while then move out for the renovation period (i.e one month/two months in a hotel/airbnb to avoid the interference because you work from home, have a baby/toddler for which it isn’t safe to be around)? Would either of this scenario’s qualify as “living in your main residency”? I unfortunately couldn’t find any details on this so was hoping you might have some advice. Highly appreciated! Leni

    Reply

    Avatar

    October 18, 2020 Bonium Tutul

    Hi Michael
    I purchased a land in 2019 (Contract of Sale in April 2019 and settlement on December 2019) to build my PPOR. For that I took owner occupied loan as well. I had my building design ready and was about to submit to CDC. However, the situation changed and I have to sell the land. Will I incur any CGT given it was absolutely intended for PPOR? If yes, what documents I have to submit to ATO to prove my intention? Should I completely ignore the option in tax return which shows “Did you have any CGT event in the Financial year?”

    Reply

      Michael Yardney

      October 18, 2020 Michael Yardney

      I can’t give you specific tax advice, but my understanding is that your intention is what is important in deciding whether a property is subject to capital gains tax.
      However if you claimed a different principal place of residence during that period, where you were living while this was all occurring, you definitely couldn’t claim the land, having said that the land was really never your PPR, so you can see why the tax department would not class it as such. Best to speak to your accountant rather than not ticking boxes in tax forms – the ATO has some serious mechanisms for checking property sales

      Reply

    Avatar

    October 15, 2020 Jack Pennell

    Hi Michael, We brought a block of land in 1987 Built in 1988 and moved in. built another place 1989-90 moved into that house it was our primary residence until it was sold.the first was a holiday house until 2018 when we had a marriage problem and I moved back into the house for one year. Now we are thinking of selling the house and would like to know if there is any capital gains tax cost to start with was $130,000.00 possible $500,000.00 now Thanks for any advice

    Reply

      Michael Yardney

      October 15, 2020 Michael Yardney

      Yes there will be capital gians tax implications – best speak to your accountant

      Reply

    Avatar

    October 4, 2020 Marcin Wierzbicki

    Hi Michael, id like to commend you on the great stream of information you have provided here.

    Just a question on our situation if you may please:

    I purchased an investment property (lets call it property A) in Sep 2013. It has been used as a pure rental up until 2 weeks ago (Sep 2020), where myself and my wife have moved in (due to the sale of our previous residential property, let’s call this property B). We intend on making property-A our primary residence.

    If we decide to sell property-A, lets say in the next 2-3 years, are we liable to pay CGT? and if so how much? What would it take in our situation to not have to pay CGT at all? Would we have to reside in property-A for longer?

    Appreciate any feedback on this please

    Reply

      Michael Yardney

      October 4, 2020 Michael Yardney

      You will have to check with your accountant, but I don’t see a way of you not paying capital gains tax on that period of time, around the seven years, where was purely a property investment. For that reason it will be important to get a valuation of the property around the time you moved in to ensure there is no confusion down the track when you plan to sell it. You cannot have two primary residences and I assume you’re not planning to pay capital gains tax on the one that you recently sold, so you can’t double up

      Reply

    Avatar

    September 5, 2020 M Raveen

    Can you please help me to understanding key issues relating to the following case study regarding CGT?
    On March 1 2012 Philip inherited a property in inner Sydney at 151 Temple Street from his Aunt. The property had been used for commercial purposes but as the area was central to his job as an interior designer he decided to move in immediately and renovate to convert to residential accommodation. The property was valued by the Aunt’s deceased estate at $370,000. Philip borrowed $100,000 on 1 April 2012 at fixed interest of 5.5% per annum payable over twenty years to finance the renovation.

    In September 2014 Philip married Kim, a plumber, and they resided in the now completely renovated property, paying out the loan early on 1 April 2016. On 1 July 2017 they purchased jointly an adjacent property, 153-155 Temple Street, for $850,000, which was significantly larger with the view to develop it into two residential properties. They purchased this property using savings of $30,000 and a loan of $960,000 (legal and other costs to purchase were $40,000 and the balance was borrowed to finance the first stage of the renovation) and using the equity in the renovated property at 151 Temple Street which was valued to obtain the loan at $800,000, as further collateral. They again opted for a fixed interest rate, 4.7% per annum with the loan maturing in 30 years. They continued to live in the original property until they had completed the first phase of the renovation at 153 Temple on 1 August 2019. The renovation had come in on budget at a cost of $100,000. They were so pleased with the renovation and the larger residence it offered they decided to move from the original property on 1 August 2019 and rented 151 Temple for $759 per week to a cousin from 7 August 2019. The rental payment was approximately 10% below market in exchange for the cousin providing labour for the renovation of the remaining property.

    Despite the rental income they are concerned that the next phase of the renovation is taking too long and are considering selling a property to raise funds quickly to complete the work. A local real estate agent has indicated 151 Temple St could be sold for $1 million and the more recently renovated 153 Temple St would sell for $1.3 million.

    Advise Philip and Kim of the tax implications of selling either property and any amount that would be included in the calculation of taxable income by Philip and Kim (you are NOT required to calculate any possible tax payable).

    Reply

      Michael Yardney

      September 5, 2020 Michael Yardney

      Is Philip and Kym someone you know? Maybe someone you know very well?

      Reply

        Avatar

        September 8, 2020 Dianne MCGRATH

        The question re Philip and Kim was from a student assignment. Seeking assistance of this nature amounts to academic misconduct. Any information you are able to provide re the person making the query would be appreciated,

        Reply

    Avatar

    August 31, 2020 Malik

    Hi Michael
    The place I am living currently with my family ( since Oct 2017 after built new @ vacant land bought in June, 2015) is our PROR, every year 38k – 40K tax deducted from my salary, and I work for IT support from home , so is there a way I may utilize a tax in better way or able to reduce taxable income? Please note I am already doing salary sacrifice every fortnight and also in process to create SMSF. Do not have any investment property for some reason.

    Reply

      Michael Yardney

      August 31, 2020 Michael Yardney

      While I understand why you maybe interested in lowering your tax, I’m surprised at this point you don’t own any investment properties because it’s more important to build your assets to protect yourself in the future. I can’t give you tax advice without knowing your circumstances.

      Reply

    Avatar

    August 31, 2020 Winni

    I bought a land in Mar 2019 and hoping to complete the house construction in Feb 2021.
    The land was bought as investment purposes and selling after construction in mind.
    Since the land was purchased in Mar 19, how does the CGT apply on sale.
    Will the gains worked out between land component and building cost or the CGT 1 year starts from the date of land purchase on sale. Thanks

    Reply

      Michael Yardney

      August 31, 2020 Michael Yardney

      Winnie, if the intention was always to buy the land and do a development to sell, then there is no capital gains tax exemption. Your pay tax at your applicable rate on any profit – this is a business venture

      Reply

    Avatar

    August 31, 2020 Alex

    Michael,
    My query was – will the main residence which has undergone major renovation attract any
    yearscgt if it is sole after living in it for over 5 to

    Reply

    Avatar

    August 23, 2020 Alex

    Hello Michael,
    We bought a property and lived in the house for over 4 years. We then built a unit behind and rented it. We have now sold the unit behind, for which I presume CGT will apply.
    My question now is, if I do major renovations to the front house which is our PPOR as we have been living in it for over 15 years and will continue to live in it. After our demise if my child decides to sell it, will CGT apply on the sale?

    Reply

      Michael Yardney

      August 23, 2020 Michael Yardney

      currently there are no death duties or capital gains tax to pay on transfer of your assets on your death

      Reply

    Avatar

    August 21, 2020 Vivian

    I have a property in New Zealand which I lived in before I moved back to Australia in Oct 2016. I rented it out in Feb 2017 and do not own any other property elsewhere in the world.
    Does it mean if I go to New Zealand to live in it for a while before Feb 2023 (6 years), even it is for a week, I can reset the 6 years? I can rent it out again and come back to Australia in Mar 2023, and I will not be charged CGT if I sell the property between Mar2023 and Feb 2029?

    Reply

      Michael Yardney

      August 21, 2020 Michael Yardney

      Vivian – we’re talking about CGT in Australia – sorry I do’t know the situation in New Zealand

      Reply

        Avatar

        August 21, 2020 Vivian

        Yes it is about Australia CGT, as the property an Australia tax resident owned overseas will also be a CGT asset in Australia taxation.

        Reply

          Michael Yardney

          August 22, 2020 Michael Yardney

          Capital gains tax is in Australian tax related to the change in value of an asset.

          Income earned overseas is taxed differently – best speak with your accountant

          Reply

    Avatar

    August 15, 2020 Jodie

    Hi Michael,
    I bought vacant land in 2018, owner built my home and moving in January 2020. I’m thinking of selling at end of this year which is one year living in the property. To avoid CGT is ownership from the time I purchased the property or from when it became my PPOR?
    Thanks for your advice.

    Reply

      Michael Yardney

      August 15, 2020 Michael Yardney

      Jodie – from what you described there should be no CGT applicable if the intention for buying hte land was to build your PPOR

      Reply

    Avatar

    August 14, 2020 Sam

    Hi,
    If we purchase the property in 2015 for $500K, move out in 2017 (at this date the value of property is $650), in 2017 we rent out the property start generating income. in 2020 we are selling the property for $600K. How we should calculate the CGT?
    From the date we purchase ($500) or the date we move out ($650).

    Reply

      Michael Yardney

      August 14, 2020 Michael Yardney

      Sam, if the property was your principal place of residence up till 2017, CGT would be calculated from the date it became an investment property, especially if you nominated a different PPOR.

      Reply

    Avatar

    August 6, 2020 NJH

    Hi Michael,
    I am currently in the process of building my new house and I also have my townhouse where currently we are living so I just wanted to know that is it a good idea to turn this townhouse as an investment or sell? this house wast built in 1990. also initially I have paid extra money in my loan account and now withdrawn for my new house so obviously I will not be able to claim interest on that after I move in to my new home. what are the available options for me? really appreciate your advise

    Reply

      Michael Yardney

      August 6, 2020 Michael Yardney

      NJH – unfortunately you have done what many people have done and pay down your home loan rather than putting money into an offset account.

      If you would’ve done that there would have been very different tax consequences regarding keeping your existing home as an investment.

      There are many factors to consider regarding keeping your current property and there is no simple answer – There are too many variables, and detail spreadsheeting may help you come up with an answer. We would have to look at the potential future growth of your existing property and also the tax consequences of not being able to claim interest amongst many many other things

      Reply

    Avatar

    July 2, 2020 Suzie

    Could you please advise whether I have to pay capital gain tax on an inherited property when selling. My mother purchased the house in Nov 2013 and passed away in Feb 2019.
    I was living with her caring for her and in her will I have the right to live here for 5 years before selling it then to divide the proceeds to my siblings. It was not used for income purposes. My mother was an Australian resident. I would appreciate knowing the right information please.

    Reply

      Michael Yardney

      July 2, 2020 Michael Yardney

      Suzie. There will be no capital gains tax payable if it is your home but if you use it as an investment property there will be CGT applicable from the time you inherited it

      Reply

    Avatar

    June 7, 2020 Grant

    Earlier this year I inherited my Mother’e house (her PPOR) and an investment property. Am I required to pay CGT on both or either properties. Note. The investment property was inherited by my mother from her parents over 20 years ago. Thanks.

    Reply

      Michael Yardney

      June 7, 2020 Michael Yardney

      The way you describe things no CGT is due as you haven’t sold anything

      Reply

        Avatar

        June 24, 2020 Alfie

        Hi Michael, we purchased a property in Melbourne (approx 580sqm) in February last year. We have recently demolished the existing property to make way for a new build we are hoping to start construction in the next month.

        Unfortunately we have encountered an issue where the fence is not on the boundary and is sitting approximately 9sqm into our property. The owners of the neighbouring property have requested a Boundary Re-alignment and Transfer of Land (its a long story!) to officially retain that portion of land on to their title. We are happy to cooperate and there will be no payments made or received for the land, but before we sign, we want to be sure that we are not opening ourselves up to any tax liabilities (CGT?). I’ve heard this could happen despite no money changing hands. We’ve agreed with the neighbour that the documentation to complete the transfer would not be completed until after the build is complete (approx August 2021). There is no money changing hands. The current mortgage on the property (land only) is $250k with a proposed construction mortgage of $770k.

        Reply

          Michael Yardney

          June 24, 2020 Michael Yardney

          Alfie = this is a complicated issue and beyond the scope of this article – please get legal and accounting advice

          Reply

    Avatar

    May 24, 2020 Pali

    Hi, I had booked block and pay gst in sept 2017 and the block of land was settled in Sept 2019 as it was new suburb, i had build house and started living in march 2020 there. now i had being transferred to different city, if i sell that place do i need to pay CGT as i have no intentions to sell it when i start building it.

    Reply

    Avatar

    May 23, 2020 Paul

    I had book a block in sept 2017 with new estate and paid 10% amount and the block actually settled in Aug 2019, build a house and start living there as Primary place of living in march 2020, now i got transferred to other city and going to start there in August 2020. If I sell this house do I need to pay CGT on it. before I have no intentions but just because of the circumstances I have to sell it. does it matter when the piece of land settlement made or actually when i started living there.

    Reply

      Michael Yardney

      May 23, 2020 Michael Yardney

      If this was your PPOR then there should be no CGT payable

      Reply

        Avatar

        May 24, 2020 Paul

        Hi Michael thanks for replying … but this place was PPOR only for 4 months , before it was a construction going on. please suggest

        Reply

          Michael Yardney

          May 24, 2020 Michael Yardney

          Sorry – I misunderstood – It depends if you had nominated another PPOR – best to ask your accountant

          Reply

          Avatar

          June 9, 2020 Richard

          Hi Michael,
          Do I have to pay CGT if I sell my PPOR purchased in March 2020 (so I have only been living in my PPOR for 3 months)?
          Thanks very much.

          Reply

            Michael Yardney

            June 9, 2020 Michael Yardney

            Richard there is no fixed time on how long you have to live in your house, but if the intention was to build it or buy it with the intention of selling at a profit, then GST would be applicable.

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    May 12, 2020 Paul James

    Hi Michael, can you please help. We moved out of the city into our holiday home in 2017. After some time we found it a bit remote to see our children so in 2018 we bought a block and built a new place for ourselves back in town. Completed in Feb 2020. we thought this was going to be our last home but after moving in we have found that suburbia just isn’t for us anymore definitely. we have been here for 3 months now lovely place great views but it is just not for us. We intend to stay here for another 15 months hopefully. Then we intend to move the other side of the hill from where we are. We have found the perfect spot for us convenience and privacy and have put an offer in on this place. We intend to do a bit of work at our find but are going to continue to occupy the place we built as our primary residence until we look to sell it after about 18 months of completion. Then move over the hill so to speak. We will probably be liable for some CGT when we sell our holiday home prior to becoming our short term primary residence. Question we don’t think that we will have to pay CGT on the place we built as we had every intention of staying there your advice please Michael? Also the place that we have now bought and are fixing up prior to selling and moving would probably attract some small measure of CGT in the future ? Cheers

    Reply

      Michael Yardney

      May 12, 2020 Michael Yardney

      There are a few moving parts here Paul – a lot has to do with your intentions, but on the surface you assumptions are correct

      Reply

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        May 12, 2020 Paul

        Thank you Michael for your help great appreciated. Yes a bit complicated. It is just the middle bit, the place that we built, and are in, and where we intended to stay, and which is our principal residence, but alas how do they say it? Give me that country, give me that countryside! We have a bit of CGT prior and probably after but not on the home we built. Glad you got your head around it. Phew! Cheers

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    May 8, 2020 Gayashan

    Hi Michel, I sold my 1st house in 2014 and purchased a land and building by using the sale proceed and the house loan. In 2019, I sold that house as I have to move for my job requirement. Is capital gain tax applicable on this.

    Reply

      Michael Yardney

      May 8, 2020 Michael Yardney

      Your requirement to pay CGT or not depends upon a number of factors including was this your principal place of residence, – if it was there should be no CGT payable

      Reply

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    May 7, 2020 dennis

    Hi Michael
    Does my son have to pay CGT on collectables eg coin collection/stamp collection and a small gold bar..assuming I specify these items in my will…

    Reply

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    March 30, 2020 Sarah

    Michael,

    What happens to Pre-CGT Shares on distribution from funds from the sale of Post CGT Property in a liquidation?

    Reply

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    February 27, 2020 Sam

    G’day Micheal,

    I’ve built and lived in a property as my PPOR for under a year at the moment. I’ve found another house I’d really like to move into as my new PPOR. How long do I need to have lived in a property to be exempt for capital gains tax? Is it three months or 12 months? Also how is the timing of that period calculated? is it calculated from when I received the COO (Certificate of Occupancy) up until the settlement, or is it the time from receiving the COO up until I place the property on the market (sign an intention agreement with a real estate agent)?

    Thanks in advance.

    Reply

      Michael Yardney

      February 27, 2020 Michael Yardney

      There is no fixed time Sam – it has to be “reasonable” and if you didn’t build with the intention to sell at a profit you should be safe

      Reply

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    February 19, 2020 MAHESH

    Thanks Michael for such a good info.
    I wish to know whether one can reinvest the capital gains received to buy the property

    Reply

      Michael Yardney

      February 19, 2020 Michael Yardney

      Yes- that’s the aim. As your property increases in value you borrow against your extra equity and use that as the deposit for your next property

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        March 1, 2020 Latifa

        Hi Michael. Thanks for such informative articles. Sorry my question is not relevant to hi Michael your above comment but I didn’t find the question section. So adding my question here. I heard if you sell an investment property and make CG on it and buy an investment property which is more expensive then the property you sell in the same financial year, you don’t have to pay CGT. Is this correct?

        Reply

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    February 12, 2020 Pirakash Siva

    Hi Michael, I have purchased a land with an existing house in 2018 and have been living there. At the same time, I am building a second unit development at back side of my yard and I am planning to sell the new development upon completion of construction. My question is, will CGT applicable for new development selling or any way to avoid it. 12 months period is from date of purchasing land or date of obtaining occupancy for new development? Thanks.

    Reply

      Michael Yardney

      February 13, 2020 Michael Yardney

      Pirakash – yes CGT will be applicable – the new dwelling is not your home. Plus it will complicate your eligibility for your current home – you better discuss this with your accountant

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    February 6, 2020 Francis

    Hi Michael,

    I purchased a house in 2015 and have rented it out for the whole time. I plan to move in the next two years to complete some refurbishment and then sell.

    I plan to get a valuation whilst tenanted / when I move in, in 2020. I will then look to get sell in 2022, after all works have been completed.

    Will the CGT liability be based on the 2020 valuation or the 2022 sale price?

    Many thanks

    Reply

      Michael Yardney

      February 6, 2020 Michael Yardney

      If you plan to move in to do some refurbishments to improve it’s value for resale you better be careful with your documentation. If the intention is to improve for resale there will be NO CGT relief

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        July 28, 2020 ILoveTaxFacts!

        This doesn’t really answer the question though! Assuming the value of a property is known at the time it becomes a PPOR, will CGT be calculated on that valuation or on the (eventual) sale price? Another accountant says CGT will be payable on a proportion of the gain equivalent to the proportion of time the property was an investment, but when I called the ATO they said that that is incorrect and the market valuation at the time it becomes a PPOR will be used. Which is correct?

        Reply

          Michael Yardney

          July 29, 2020 Michael Yardney

          Clearly this is the type of advice you need to get from a professional accountant, not from a blog on the internet. If your professional advice is conflicting, please don’t expect to get a definitive answer here.

          Reply

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    November 27, 2019 Damien

    Hi Michael,
    I moved out of my ppor which I lived in for 7 years. I then moved out and rented it moving in with my now wife. We then purchased our own home (all within 6 years) and now I have sold my old place. Will I be exempt from cgt or will buying a new house with my wife and moving in mean I’m no longer eligible for the exemption? Thanks!
    Damien

    Reply

      Michael Yardney

      November 27, 2019 Michael Yardney

      You can only claim one PPOR for tax purposes – this now gets complicated in your situation depending on how you documented things – best speak with your accountnant

      Reply

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    November 25, 2019 Sara

    Hi Michael, Thank you for your insights. Please, can you give me your feedback on my situation where I and my ex-husband purchased a property in April 2014, however, rented it out from September 2014. In mid 2016, I separated from my husband and had the property transfered to me backed by court orders. I moved into the house with my Son from the start of 2017 and continue to live in it. I earn $80,000 salary. If I decide to sell the property in 2020, am I able to get stamp duty exception? If not, how much longer will I need to live in the house to get exception?

    Reply

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    November 2, 2019 Warren Mattson

    Hello Michael,
    Since 2014, 5 times one after the other, I bought vacant land, built a new house lived in them as my only and primary residence for 12 months and sold them.
    Do I have to pay CGT and or GST on them.
    silly enough I have not done my tax returns for this period.
    Now I want to settle with ATO, hence the question.
    Thanks

    Reply

      Michael Yardney

      November 2, 2019 Michael Yardney

      You better seek tax advice on this because not to pay CGT will depend on your intention – if you built with the intention of selling and making a profit you’ll have to pay CGT

      Reply

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    October 13, 2019 Melissa

    Hi Michael, this is Melissa again. Would you please explain more in detail about the increased value that you have mentioned in your last reply. I bought the land for $325K in 2015 and now it is around $410K. Did you mean the increased value is on only land or including a house on it? Does ATO work the increased value out when I sell my new house?

    Reply

      Michael Yardney

      October 14, 2019 Michael Yardney

      Melissa – I can’t give personalised tax advice on this site, it would be wrong to do so esp as I’m not an accountant – I only give the big picture – please speak with your accountnant

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    October 12, 2019 Melissa

    I sold a house in July 2019 that was my ppor from Sep 2013 to July 2019. And now I am building a new home as my new ppor on a land that I bought in April 2015. I am planning to move in my new house straight away once it is completed. If I sell the new house after living in there for a while like 12 months, am I able to avoid CGT when I sell the new house?

    Reply

      Michael Yardney

      October 13, 2019 Michael Yardney

      Melissa The should be no CGT on your old house, but you’ll have to pay CGT on the increased value between 2015 and when you move into your home

      Reply

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      October 19, 2019 John Flint

      You should also factor in GST as it is a new house.

      Reply

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    September 23, 2019 Michelle

    Husband and I have a property that our son has lived in since we’ve owned it. If we sell it soon for a profit will we have to pay CGT as it was never actually rented?

    Reply

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    September 19, 2019 Jacob

    Hey Michael,

    My father is in the process of selling a house and would really like to know if he will be required to pay capital gains tax on sale.
    My father bought this house in the 70s with his wife (my mother who passed away a few years ago) and the property has been rented since it was purchased. Question he is wondered is will he father be required to be CGT on proceeds of sale due to my mothers passing and the house being transferred into his name solely a few years ago while the house has been continually rented since.

    I really look forward and would appreciate your helpful response.
    Kind regards,
    Jacob

    Reply

      Michael Yardney

      September 19, 2019 Michael Yardney

      Yes – it sound like he will have to pay CGT – this will now be a little complicated so seek your accountant’s advice

      Reply

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    September 15, 2019 Naresh Singh Bhandari

    Hi
    I purchased the land as an investment in 1991. The purchase price was $250,000, plus $5,000 in stamp duty, $10,000 in legal fees. To fund the purchase, I took out a loan on which I paid interest totalling $32,000. During the period of ownership, council rates, water rates and insurance totalled $22,000. In January 2005 a dispute occurred with a neighbour over the use of the land and legal fees incurred amounted to $5,000 in resolving this dispute. Before putting the property on the market $27,500 was spent to remove a number of large dangerous pine trees that were on the land. Advertising, legal fees and agent’s fees on the sale of the land were $25,000. The land was sold for $ 1,000,000 on Nov 2015. What is my tax liability for 2015??

    Reply

      Michael Yardney

      September 15, 2019 Michael Yardney

      I can’t give you personal tax advice here – esp in a more complicated matter – why not ask your accountant?

      Reply

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    September 15, 2019 jay

    I have a house that I have lived in for 2 years and rented for 3 years I want to sell it so that I can buy another house from that money, will I have to pay CGT

    Reply

      Michael Yardney

      September 15, 2019 Michael Yardney

      Jay – probably not – as long as you haven’t claimed another house as your PPOR – check with your accountant

      Reply

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    September 14, 2019 Brett Smith

    Hi Michael-I plan on selling my current investment property in my personal name (which was once my PPOR for a couple years), and expect to make a capital loss, can this loss offset any future CGT for other investment properties owned by my wife, and/or properties in our joint names? Thank you in advance!

    Reply

      Michael Yardney

      September 14, 2019 Michael Yardney

      Capital losses can be carried forward for the same person (or taxable entity) to use against capital gains in the future

      Reply

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    September 12, 2019 Missy Cee

    Hi Michael

    I’m looking at selling a property. It will be the first property I have ever sold. I have been given conflicting advice regarding CGT. I purchased the property in August 2011 and lived in in until October 2013. I have since been renting it out. Do I have CGT exemption until the start of next month? Am I best to move back into the property while I am selling? If so, is there a minimum amount of time I need to move into the property for?
    My tax accountant advised that “you do not avoid CGT by moving back. You pay CGT by the cost base when you started renting it out, value of property, and the value when you mover back in., The difference with add backs of Allowance and building write off is the gain or loss and if a gain you can use the 50% discount.” I’m very confused as this seems contrary to your advice in this article. Any assistance is greatly appreciated! 🙂

    Reply

      Michael Yardney

      September 12, 2019 Michael Yardney

      This is such a common question that I have just recorded a session with Ken Raiss, of Metropole Wealth advisory on this topic – watch out for it.
      I’m not going to give you tax advice on a public forum that would contradict your tax accountant.
      the answer to your question will depend upon whether you have claimed another property as your principal place of residence in the meantime

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    August 29, 2019 John Bryan

    Hello Michael,
    Great info you are giving, I do appreciate how much advice you can provide.
    I purchased a house as an investment in 1998, have owned it now for 21 years. I have lived in it for two years (2008-2010) during which time it was my PPOR. At all other times it was rented out. I’m considering moving back into it as I am currently renting elsewhere.
    Would living in it now for six months or six years or any other period of time bring any CGT relief if sold very soon after?
    Cheers,
    John

    Reply

      Michael Yardney

      August 29, 2019 Michael Yardney

      John
      Yes it will give a very limited relief using a complex formula – but as for the majority of time it was an investment there may be a substantial CGT bill – see your accountant

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    August 29, 2019 Dil Fern

    Hi Michael,
    This is my case.
    If I move back to my first property in Glenroy now, will I be able to claim it as the primary place of residence. Will I be able to qualify for CGT exemption with the 06 year rule in case if I stay there for the next 12 months or more.
    Thanks.

    1/06/2014 Bought the house at Glenroy.
    15/12/2014 Rend the house at Roxburgh Park following an accident and went to live with in-laws.
    1/01/2018 Bought the second property in Wollert.

    Reply

      Michael Yardney

      August 29, 2019 Michael Yardney

      Dil
      If you didn’t cliam any other property as your primary residence you should still qualify for a CGT exemption

      Reply

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    August 26, 2019 Patrick John

    Bought the property in January 2011 for 360,000. lived there until March 2013. Obtained a valuation of $400,000. Have had tenants in the property since. Sold August 2019 for $460,000. Am I liable to GCT?

    Reply

      Michael Yardney

      August 26, 2019 Michael Yardney

      Yes you are using a complicated formula – best to see your accountant

      Reply

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    August 23, 2019 David Watkins

    Purchased a house for $290000 in August 2016 sold for $270000 in 2019 to down size.

    Lived in house did not rent out at anytime after .
    Do I have a problem .

    Reply

      Michael Yardney

      August 24, 2019 Michael Yardney

      I assume you’re asking are you liable to pay CGT – from what you’ve said – no there should be no CGT liability –

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    August 12, 2019 Matt

    Hi Michael,
    My wife and I are in the process of building our first home, however shortly after commencing the build, I got transferred to another state (Armed Services), so have decided to sell the home when it’s finished and buy in our new state. Will we be subject to CGT, given out intention was for this to be PPOR?

    Reply

      Michael Yardney

      August 13, 2019 Michael Yardney

      Matt – in your case you intention may be easier to prove than most, but the exception is for a PPOR and it sounds like this won’t be your PPOR so I can’t see how you can claim the CGT exemption

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    August 2, 2019 Brett

    Hi – I bought a house in 2001 and used as a PPOR from the outset and for the next 9 years. Since 2010 it has been rented and I have been overseas (so have had no other PPOP for tax purposes) . If I sell tomorrow how would CGT be calculated? Or if I moved back in tomorrow, how long would I need to live there to avoid CGT? TIA

    Reply

      Michael Yardney

      August 2, 2019 Michael Yardney

      Brett – Ken Raiss answers this question here : What happens to Capital Gains Tax if I rent out my home

      Reply

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    July 24, 2019 Mrs Gillian

    Hi,

    We bought a block of land a couple of years ago, and pursued to build. We paid a builder for plans and almost signed, but then my husbands job went sour and we had to move interstate and sell the land. If we prove we were trying to build on the land, would we be able to avoid CGT? Thanks

    Reply

      Michael Yardney

      July 24, 2019 Michael Yardney

      Sorry – the answer is no – the only exemption for GST is if it is your house (PPOR)

      Reply

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    July 22, 2019 Lauren Cobb

    Hi Michael – My husband and I sold a block of land at the start of this year, as this is the only property we own are we required to pay capital gains tax on the profit we made?

    Reply

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    July 17, 2019 Chris

    I’m looking at doing a development and living in one of the new dwellings as my PPOR and renting the others out. If I am to sell the dwelling that I occupied as my PPOR in the future is this fully exempt from Capital gains tax?

    Reply

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    July 11, 2019 Jen

    Hi, My Mother and I inherited a holiday house from my Grandmother (my Mums Mother) in 2011. It has only ever been used by us as a holiday house, never rented out. My Husband and I are selling our home and hope to move into the holiday home for a period until we find another property to purchase. As the holiday house would be considered as our primary residence for a time, would this remove the requirement to pay CGT?

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    June 30, 2019 Sarah

    Hi Michael
    I live and work in Australia and have done for 30 years (I am a NZ citizen). I recently sold a rental property in New Zealand. I pay tax in NZ and also declare my NZ earnings in Australia and ay extra tax here! NZ have no CGT, just wondering if I would have to pay CGT in Australia on the sold NZ property.

    Reply

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    June 28, 2019 Jeremy Charoux

    Hi Michael
    I purchased our family home 6 years ago. We lived in it for one year before moving overseas for work purposes. If I sell the house now what would the CGT implications be? Many thanks

    Reply

      Michael Yardney

      June 28, 2019 Michael Yardney

      Jeremy if you have owned the house for 6 years or less and have never claimed a different PPOR- then there should be no CGT applicable if you sell – but as always – check with your accountant and make sure everything is documented correctly

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    June 28, 2019 Alex

    Hi Michael, I bought an old house and plan to demolish it and build a new house. As you know, it will take time to get approval for building a new house. I am thinking to rent out the old house for 6 months. Once the approval of building is approved, I will then demolish this old house and build a new one. Will the CGT apply to my new house if I rent out the old house for 6 months (they are on the same land)? Thanks.

    Reply

      Michael Yardney

      June 28, 2019 Michael Yardney

      Hi Alex – here’s an answer by Ken Raiss

      The full Main Residence Exemption applies if you occupy and use the property as your home immediately after purchase and live in it until you sell.

      If you rent the property before moving in then the Capital Gains will be apportioned between days rented and days you use it as your home.

      Therefore the six month rental period will create a taxable portion on any Capital Gains with the 50% general discount applied if the property was owned more than 12 months. This taxable portion will reduce the more days you live in it as your home.

      You may receive some benefit in regards to the Main Residence Exemption during construction as this time may not count towards the days rented period but this will depend on the circumstances

      Reply

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    June 27, 2019 Bernie Dixon

    Hi Michael, My PPOR was purchased in 1972 in my wife’s name, then in 1992 in was changed to both our names, then in 2017 my wife passed away and it came into my name alone. I am now sub-dividing half of the property for sale and keeping the portion with my home for myself. Will I have to pay CGT on the sale and if so what and from when can I claim deductions (land rates only). I did not pay anything for the original property.

    Reply

      Michael Yardney

      June 27, 2019 Michael Yardney

      Bernie – if you sold the property as is then there would be no CGT, but now you’re changing the nature of the property – that’s when CGT will kick in – discuss with your accountant

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    June 26, 2019 Felicity

    Hello Michael.

    I purchased my first home in 2006. I lived in it for almost 3 years as my PPOR. I relocated due to my work and rented out my house. I then purchased another house in my new area which became my PPOR. I rented out my first home between 2009 and 2017, with a few months vacancy during this time.

    Due to my work, I was required to move back to the area where my first home was purchased. I sold my second home privately and moved back into my first home which remains as my PPOR.

    I am looking to sell this place as I am required to move again as part of my work and was wondering how I am situated for CGT. Would I be better off renting it out for a short period again to re-set the 6 year rule?

    Reply

      Michael Yardney

      June 27, 2019 Michael Yardney

      Felecity – there are too many variables involved – I can’t give you an answer without knowing your plans, your other properties, whether you’re planning to keep this property in the long term or sell it

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    June 13, 2019 Peter

    Hi Michael. We bought a property with a house 13 years ago that we are now planning to demolish and rebuild. We will be doing the build to allow for subdivision in the future. Is the CGT on the vacant block when we subdivide treated the same way as if we just subdivided with an existing house on the property already or does demolishing and rebuilding add technicalities?

    Reply

      Michael Yardney

      June 14, 2019 Michael Yardney

      Lot’s of alternatives here – did you live in the property or was it always an investment – what was your intention when building and subdividing – these must be documented – seek advice before you do anything

      Reply

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    June 13, 2019 Kristy Eaton

    Hi Michael, I bought my first home about 7 years ago. I lived in it for the first 5 years and have rented it out for the past 2 years. I plan to sell it in the next 12 months. Will I have to pay CGT?

    Reply

      Michael Yardney

      June 13, 2019 Michael Yardney

      Please seek your accountant’s advice – but if you have not nominated another PPOR then you should not have to pay CGT

      Reply

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    May 20, 2019 Michiel

    Hi Michael, we bought an old house and we decided to knock it down and rebuild (house #1). Rather than renting, we bought another house to live for the duration of the built (house #2). House #2 is now our PPOR and will be for at least 1 year. It is our intention to rent out house #2 after completing of the built and move back into house #1 (which then becomes our PPOR. Does the six-year rule apply if we well house #2 (within 6 years)?

    Reply

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    May 11, 2019 Marco

    spoken to my accountant and he said my mum has to pay CGT if she sells the property because it was transfer to her in 1997.

    Reply

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    May 8, 2019 Vinko Kovacevic

    Looking for information on Transferring a Investment property(small current returns) to my Child as I no longer can manage the property, however I do not have the ability to pay the possible CGT, what occurs in a event like this? however understand my child would have to pay stamp duty…property was purchased way back in 1986

    Reply

      Michael Yardney

      May 8, 2019 Michael Yardney

      Yes – you would have a huge CGT bill to pay – but there are other solutions that will have the same effect without the cost.
      You need specific advice that will cost a bit, but save you a fortune – why not see Ken Raiss of Metropole Wealth Advisory I know he has the answer you need

      Reply

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    May 5, 2019 Marco

    Hi Michael,
    Can you clear this for me, my dad purchase a rental property in 1979 and then he transfer the title to his wife in 1997 which they both still have it today. There hasn’t been no renovations done to it since apart from them painting it inside. If they sell the property or transfer it to us, will they have to pay CGT?

    Reply

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    May 5, 2019 Marco Bosio

    Hi Michael,
    Can you clear this for me, my dad purchase a rental property in 1979 and then he transfer the title to his wife in 1997 which they both still have it today. There hasn’t been no renovations done to it since apart from them painting it inside. If they sell the property or transfer it to us, will they have to pay CGT?

    Reply

      Michael Yardney

      May 5, 2019 Michael Yardney

      NO GST payable as they bought it before GST came in – but you’ll have to pay stamp duty

      Reply

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    May 3, 2019 Ray

    My wife and I decided to separate, we sold our main home and paid off our investment property. We split the assets 50/50. I bought a property 250km away which I am currently renovating and we transferred the investment property to my wife. I still live in the investment property until I retire in about 18 months time. What are the CGT implications.

    Reply

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    April 30, 2019 Dina

    Lived in Australia since Feb 2014. I have a house in NZ which I lived in for 5 years and then rented it since I moved to Australia. Would I have to pay CGT in Australia if I sell the property. Am I entitled to the 6 year rule? Thank you.

    Reply

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    April 16, 2019 Mary

    I purchased a property in 2016 in NSW for $1.4 million and looking at selling it for $2.2 million. I also have a loss from shares of $230,000. Can you please explain how CGT is calculated for my scenario and how much CGT will I have to pay? Thanks.

    Reply

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    April 15, 2019 Kieran

    Hi Michael – I bought a property in Sydney but now live permanently in the UK (where I am from) and would like to sell the unit. I do not currently submit tax returns in Australia. At what point does the CGT become payable? If I sell the property after July 2019 am I right in thinking that I would need to file an income tax return for the 2019/20 tax year and pay some CGT by October 2020? Thanks

    Reply

      Michael Yardney

      April 16, 2019 Michael Yardney

      Your assumptions are correct Kieran

      Reply

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        May 7, 2019 Olivia

        Hi Michael,
        I’ve tried to lay this out clearly:
        2014 – bought a property on Central Coast and rented it out
        2018 – bought a property in Sydney which is my primary residence
        2020 – plan to sell Sydney property having done renovations CGT free
        2020 – plan to move into Central Coast property, have it valued, then start extensive renovations
        2021 – plan to sell Central Coast property
        Will I pay CGT on Central Coast property on the increase in value from 2014 to the valuation done in 2020, or will CGT be calculated on sale price in 2021?
        Is there any way to have a consultation with you?

        Reply

          Michael Yardney

          May 7, 2019 Michael Yardney

          As there is a lot of money involved in this yo to see kenu really should be seeking advice, especially is you plan to renovate and sell for a profit, as that’s not in the spirit of the rules. The best person to have a consultation with is Ken Raiss my business partner in Metropole Wealth Advisory – click here for details and to organise a time to see Ken

          Reply

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    April 15, 2019 Raj

    Hi Michael

    I purchased a property and rented out in 1995. We then moved in to live in 2014 when we also valued our property. Sold this property in 2019 when the value was higher. Will my capital gains be calculated on the value of property in 2014 or in 2019?

    Reply

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    April 15, 2019 Malisa

    Hi Michael,
    We are currently building a investment home with the view to rent it out once completed. Though if we decide to sell it instead when complete, will CGT apply and from what purchase point does the 12 month discount rule apply, ie when we entered the contract for the land and/or build or from when the house is completed and ready to rent.

    Reply

      Michael Yardney

      April 15, 2019 Michael Yardney

      That’s a great question Malisa. if you sell the property when complete, you will pay CGT straight away even though you may have purchased the land in entered into a building contract over a year ago.

      Reply

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    April 8, 2019 Sue

    I’m selling my only residence in order to move back to the uk. Is there a time limit to buy another property in the uk before I pay cgt?

    Reply

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    April 7, 2019 Ryan Nevison

    Hi Michael,
    I bought a vacant block of land in Perth February 2017, I started a new build in May 2018 and have just completed it. I plan on living in it as my PPOR for at least six months due to getting the FHOG. If I choose to sell the property just after six months, am I exempt from CGT if I make a gain?

    Reply

      Michael Yardney

      April 7, 2019 Michael Yardney

      If you bought the property with the intention of selling it at a profit and taking advantage of the FHOG then you could well be liable to pay tax.

      The FHOG is to help people buy a home to live in not to sell and profit. Similarly – the CGT exception helps home owners upgrade, it’s not to help investors profit.

      Of course if your intention was always to live in the property, but your circumstances changed then you may not be subject to CGT – but in some states you have to live in the property for 12 months to be eligible for the FHOG

      Reply

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    April 4, 2019 Sam

    G’day,

    We just finished building ourselves a new house that was intended to be our PPOR for a long time, but now I’ve been made redundant and plan to move far away for work. Will I be subject to CGT on my newly built house if I sell it withing 12 months of moving in?

    Thanks in advance.

    Reply

      Michael Yardney

      April 5, 2019 Michael Yardney

      If that was always your intention and you do move in for a period of time and never rent it out, it is likely you will not have to pay CGT

      Reply

    Avatar

    April 2, 2019 Shane

    I bought a property with my brother in 1996 and used as a family home.
    1999 my brother married and with my parents I moved out of the house into a new house I bought.
    My name was left on the property as a co-borrower as my brother had financial difficulties and he managed the loan with his wife.
    2018 he transferred the title fully under his name.
    Now I found myself liable for serious CGT on a property that I never rented, negative geared or even did get money at the time of transfer…
    Any concession or CGT exemption can be applied under this unfortunate scenario?

    Reply

      Michael Yardney

      April 2, 2019 Michael Yardney

      Shane – that’s a real pity isn’t it. I guess the only concession is that you sold at a profit not a loss.
      Owning properties int he right names sor structures is an important issue

      Reply

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    March 31, 2019 Dion

    Hi, my dad just sold his investment property to me. He is retired and draws an income thru super. As he is retired, is he exempt from paying CGT on this transaction? Thank you

    Reply

      Michael Yardney

      March 31, 2019 Michael Yardney

      No Dion – he will still have to pay CGT – as he would for any other income he receives, but if he receives no other income he will be taxed as if this ordinary income

      Reply

    Avatar

    March 19, 2019 Georgie Nekel

    My son purchased a property about three years ago and has not lived in it as it required a lot of renovations. once it is complete he is going to live in it. Down the track will have to pay Capital gains on it then.

    Reply

      Michael Yardney

      March 19, 2019 Michael Yardney

      If it was rented out in the mean time before it becomes his PPOR this could cause an issue for the period it was not his home

      Reply

    Avatar

    March 7, 2019 Khan

    Hello! I am new to the real estate world and from my limited understanding, CGT is paid by the financial year and not on the contract or settlement date. But to verify I’m wondering, when does someone pay CGT?

    Reply

      Michael Yardney

      March 7, 2019 Michael Yardney

      Your capital gains is calculated the day your contract is signed. It is added to your income for that financial year and often paid as an adjustment before march the next financial year

      Reply

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    February 19, 2019 Manuel

    Hi Michael,
    I bought an apartment before 2017, and it is settled in June 2019, I want to sell it before the settlement, is there any CGT that I am subject to?

    Reply

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    February 12, 2019 Learoy Kerner

    What is the treatment for the tax losses when passed away? Can the heirs use it against their gains?

    Reply

    Avatar

    January 15, 2019 Adam Wright

    Hi Michael, I did a subdivision on some land owned for many years. We kept one block in which I built a new home on. As soon as the new home was built we moved into the house which is our Principal Place of Residence. What is the time period I need to live in the new house before selling it for us to be void of paying and CGT?

    Reply

      Michael Yardney

      January 15, 2019 Michael Yardney

      Adam – one of the tests is the purpose of your redevelopment – if it was always to resell at a profit then you’d have to pay CGT.
      I’m tol;d the tax law doesn’t prescribe an exact period of time you need to live in the house , but clearly if it was a couple of years you’d have a better argument if you were questioned than a couple of months

      Reply

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    January 8, 2019 Malcolm

    I own a primary place of residence house in Sydney. I moved interstate and rented it out. I purchased a strata unit interstate in 1993 to live in it until 1996 when I returned to Sydney to my PPOR and rented out the interstate unit. I know that my Sydney house will be exempt from CGT, however I still own and rent the interstate unit. If I sell it say in 2019, please advise if my thoughts on calculating the capital gain for tax purposes are correct? I derive the cost base which includes the purchase price, the costs of buying and selling (legals, stamp duty, agents fees etc), Capital improvements, Rates and strata fees and mortgage loan interest only for the 3 years of occupancy, and deduct this from the sell price, and because I lived in the unit for 3 years of the 26 years of ownership, I reduce the resulting capital gain by 23/26 which is the proportion of the time the unit was rented.

    Reply

      Michael Yardney

      January 8, 2019 Michael Yardney

      Malcolm
      Check with your accountant, but since you can’t have 2 PPOR,s at the same time, if you claim Sydney as your PPOR you can’t also claim the apartment

      Reply

    Avatar

    November 21, 2018 Jim

    Hi Michael,
    If I rent out rooms in my PPOR, what is the CGT implication?
    My understanding from your article is if sold within 6 years since I started renting out the rooms, I will be exempt from CGT?
    If not, then say I stop renting out the rooms, will that reset the 6 years?
    Can I claim Negative Gearing on the rental income and will that change the CGT?
    Thank you.
    Jim

    Reply

      Michael Yardney

      November 21, 2018 Michael Yardney

      No – once you rent out a room, or use part of your home for any other business purpose, that portion isn’t exempt from CGT.
      If you stop and start renting out part of your home like with Arbnb – things get more complicated – better ask your accountnat

      Reply

    Avatar

    November 12, 2018 Cath

    Hi Michael,
    We purchased a villa in 2002 for $193,000, rented it out till 2005 then lived in it and raised our kids there till 2016. The last 2 years, we rented it out again due to work in another state. We are just about to move back in but are planning to sell up and buy a bigger property within the next couple of months. It is expected to sell for around $600,000. Will we be up for CGT? Thanks for your help.

    Reply

      Michael Yardney

      November 12, 2018 Michael Yardney

      Yes you will – it was initially an investment property, but as it was your home for some time this will be a more complicated issue, so best to consult your accountant

      Reply

    Avatar

    November 10, 2018 Christine

    Hi Michael,
    Im hoping you can clear up my confusion on CGT. Acording to the Ato CGT is worked out following the 5 elements. In regards to depreciation already claimed, it does not mention anywhere that it must be deducted from the cost base. So if my purchase price is 100k including legal fees etc and my selling price is 200k less selling fees with no renovations done to the property BUT depreciation claimed over the years following a depreciation schedule(completed by a surveyor) for capital works totaling 5k and 5k for plant and equipment would the capital gains be :
    1)200k – 100k= 100k capital gain OR
    2) 200k – 90k(100k – 5k capital works – 5k plant eqipment) =110k capital gain OR
    3) 200k – 95k(100k – capital works only $5k) =105k capital gain

    Reply

      Michael Yardney

      November 11, 2018 Michael Yardney

      Christine – I’m not going to give you tax advice on the exact amount, but I am certain that any depreciation you claim MUST be deducted from the cost base – it increased your CGT. But you’ve had use of the funds in the meantime – it’s helped your cashflow

      Reply

    Avatar

    November 9, 2018 Dave

    We lived in our house for 7;year then rented it for 8 years, we are moving back into it and making it our primary place of residence, how long do we need to live in it to negate CGT?

    Reply

      Michael Yardney

      November 9, 2018 Michael Yardney

      Dave – there is no fixed time specified, but I’ve heard 6 months mentioned – however the longer you are there (12months +) the better

      Reply

    Avatar

    November 5, 2018 Anthony

    how long do you need to live in a house as your PPOR before exemption? Say I built a new house, have lived in it for 10 months and circumstances have prevailed where I have to sell. Do I have to pay capitol gains?

    Reply

      Michael Yardney

      November 5, 2018 Michael Yardney

      Anthony – there should be no need to pay CGT based on what you suggest – if you built the house with the intention of selling for a profit that would be a different story

      Reply

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    November 1, 2018 Judith MacKintosh

    They are wanting to own the property and remove all liability from us

    Reply

      Michael Yardney

      November 1, 2018 Michael Yardney

      The GST and stamp duty applies as you have to transfer the title, not just the mortgage

      Reply

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    November 1, 2018 Judith MacKintosh

    We bought a property for our daughter and partner 12 months ago. They have been responsible for the mortgage (which is our name) and all other expenses to do with the house. They are now wanting to put the mortgage in their name now. Will we have to pay CGT even though it is not technically a sale?? We have not claimed any tax offsests against the house.

    Reply

      Michael Yardney

      November 1, 2018 Michael Yardney

      Judith – are they hoping to own the property? if so, then you’re liable to pay CGT and they must pay stamp duty.
      What is the purpose of them putting the mortgage in their own names if they don’t own the property?

      Reply

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    October 26, 2018 Lee Wilson

    Hi Michael,
    We are about to sell a property which we purchased in Dec 2008. We lived in this until July 2014 as our PPOR after which it’s been rented out until now. From July 2014 to Oct 2016 we lived in our second PPOR, which we again rented out post Oct 2016.

    Are we still entitled to the 6 year rule for the first property and do we forgo the opportunity to apply the same rule to the second property if we do this? Is it a straight forward process to claim the clearance certificate from the ATO on this basis?

    Thanks!

    Reply

      Michael Yardney

      October 26, 2018 Michael Yardney

      You can only claim one PPOR at a time – if you have claimed a different one in the meantime it’s best you speak with your accountant because it will not be as simple as you hoped

      Reply

    Avatar

    October 20, 2018 Sally

    Thanks. Our super is in retirement phase so currently no CGT. If a future government makes CGT payment on investments sold in pension phase, can they backdate it & make it retrospective?

    Reply

      Michael Yardney

      October 20, 2018 Michael Yardney

      Sally I guess they can do whatever they like – can’t they? But it’s rare to make tax changes retrospective

      Reply

    Avatar

    October 20, 2018 Sally

    Hi Michael
    When you are estimating base costs & add in stamp duty & renovations, can you also deduct interest paid on a mortgage? (It was negatively geared so rent didn’t cover costs). Is there any rule where you can reinvest in another investment property in a certain time so now CG tax? Thanks

    Reply

      Michael Yardney

      October 20, 2018 Michael Yardney

      Sally – yes you can offset cary forward losses from negative gearing against Capital gains.
      The answerr to your second question is NO

      Reply

    Avatar

    October 10, 2018 Anne

    Hi Michael

    I am 70. I have sold my investment property and now have $373.000 after minus CGT rules and costs . How much Capital Gains Tax will I pay? Will I be able to put $300,000 into my State Super Plus Fund and then claim back the 15% tax on my tax return?

    Reply

      Michael Yardney

      October 10, 2018 Michael Yardney

      Super is a financial product and I can’t advise on that. Not can I tell you your CGT payment as I don’t have details of what your property cost you, depreciation allowances to add back etc.
      You better see an accountant – you can’t afford to get it wrong

      Reply

    Avatar

    October 8, 2018 Rane

    Hi Michael,

    I have bought a property in VIC which was acquired prior to Sept 1985. I believe this is pre-CGT asset. I have lived in this property till 2005 and then it was rented out until it was sold in May 2018. In 2008, I bought another property in NSW and used it for living by myself. What are the CGT Consequences of this.?
    1. Do I have to pay capital gains tax on the sale of the pre-CGT Asset.? If so, from which period to which period.? How the cost is being calculated? Do I need to get a market valuation for this.? If so, on what date.?

    2. If I did not acquire the second property, but rented the first property from 2005 to 2018, what are the CGT Consequences.?

    Reply

      Michael Yardney

      October 9, 2018 Michael Yardney

      Rane
      It you bought a pre GST asset there is no tax payable, whether you lived in it or sed it as an investment.
      There should be no CGT payable on your principle place of residence in NSW as long as you did not rent it out

      Reply

    Avatar

    September 23, 2018 Michael

    Hi Michael.

    I am still needing to know if my New Zealand property, purchased prior to double taxation agreements between the two countries being brought in, will be CGT applicable in Australia when sold.
    A difficult one which no expert has been able to give a definitive answer to. Hope you can help.

    Reply

      Michael Yardney

      September 23, 2018 Michael Yardney

      Michael – please don’t expect a definitive answer to your personal tax problem from me – I’m not an accountant and it would be wrong to give you specific advice. Pay for professional advice – it will be worth it

      Reply

    Avatar

    September 19, 2018 Jamie

    Hi
    If i bought 2 properties today for $500,000 each and i lived in 1 for 15 years whilst i rented the other out. If i then sell my PPOR for $1,000,000 and move into the previously rented property. Would i pay any CGT?
    Would the investment that i move into be subject to CGT later when we pass away for example and leave in in a will?

    Reply

      Michael Yardney

      September 19, 2018 Michael Yardney

      Jamie – you wouldn’t pay CGT on selling your PPOR for $1million, and when you move in to the next property you won’t have to pay tax for the growth you have while it is your PPOR, but you’d have to pay tax on the growth in the first 15 years if you sell it. Your heirs won’t pay tax on the proeprty till they sell it.
      But here’s the thing…the tax laws will change a few times before then, so don’t invest or strategise for tax purposes

      Reply

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    September 3, 2018 Tenzin

    I bought my place back in 2012 and it has been my primary residence, i want to buy another property with intention of selling my original property after i do renovations. Will i be exempt from CGT? Also i were to keep my old place and rent it out whilst living in the new property how long am i exempt from cgt?
    Thanks

    Reply

      Michael Yardney

      September 3, 2018 Michael Yardney

      As I understand you will be exempt of CGT if you sell your home as described adn for up to a further 6 years unless you declare a different PPOR

      Reply

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    August 31, 2018 Ben

    I bought a house in 2011 and lived there for two years then relocated and rented out from 2013 since job changed. Now I just bought new house close to my work and having no intention to sell the previous one. Due to its close to six years since I rented it out, if I want to nominate new house as my PPOR today, can I do a valuation of old house without ceasing renting as base cost of CGT for future selling or the base cost would be market value when I first rented out regardless? Or I have to stop renting out to do the appraisal…….not clear at this point, any advise would be much appreciated.

    Reply

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    August 30, 2018 Rohit

    Hi
    I have got several rental properties in New Zealand (purchased during 2004-2006) and after having migrated to Brisbane last year in November 2017, now I am confused as to whether I will be paying CGT here to the Australian Government when I sell as currently there is no CGT back in NZ.

    Reply

      Avatar

      September 10, 2018 Rohit

      Would appreciate your help with this please

      Reply

        Michael Yardney

        September 10, 2018 Michael Yardney

        Rohit As an Australian citizen you’ll be now paying tax on all income you earn aropund the world, unless you pay it in the country where you earned it and we have a reciprocal agreement – Best to ask your accountant

        Reply

    Avatar

    August 27, 2018 Jamie

    Hi. I see in the article that the 6 year rule resets’. So i lived in my PPOR first then rented it out for 10 years. I am 4 years over the 6 year rule. If i live in it again e.g for a year or twi then rent it out again, will i get another 6 years where no capital gains applies?

    E.g if i were to aquire it in year 1 and live in it for a year. Then rent for 10 years. Then live in it for 2 years. Then rent for another 6 years would capital gains only apply to 4 years out of a total of 19? Or would only 6 yrs plus the years i lived in it be exempt?

    Reply

      Kenneth Raiss

      August 30, 2018 Kenneth Raiss

      Hi Jamie
      In summary, yes you reset the 6 years each time you move back in but each period only counts to the days of residency and if you rent out for a period of more than 6 years the benefits are diluted given the calculation required to determine the capital gain and then the taxable capital gain. This area of the Main Residence Exemption can be complicated and other issues such as the actual date when the property was first used to generate income can greatly change the outcome as the gain is proportional and the cost base is determined by the market value when you move out. Happy to give more detail if you send specific details including dates and relevant market values.

      Reply

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    August 24, 2018 Benjamin Foster

    Hi Michael, I have a property that I purchased in 2012 for $515,000, current market value is $750,000. I lived in the property until 2014 before moving overseas. The property is now rented out. As an Australian citizen but current non-resident (I live now in Switzerland) what would be the rate of CGT I would need to calculate if I was to sell the property? What other things do I need to consider? Thanks

    Reply

      Michael Yardney

      August 24, 2018 Michael Yardney

      [signinlocker]If you had this as your Primary Place of residence and haven’t claimed another one since, it is possible their would be no CGT (6 year rule) – definitely worth speaking to your accountant

      Reply

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    August 23, 2018 steve

    hi i recently sold an investment property that was purchased in march 1998 and sold sept 2017, I bought it for $94000 inc expenses and sold it for $340,000 and minus expenses collected $320,000. I am a little confused about the cgt .
    I have been trying the cgt calculators and getting figures ranging from $38000 to $50,000+ ,Is this the figure i will pay the tax office or is this a figure that is added to my taxable income .
    I have not received a wage in the past couple of years so does this effect the amount i will owe the ato.
    THANKS.

    Reply

      Michael Yardney

      August 23, 2018 Michael Yardney

      Your capital gain gets a 50% discount and then this is added to your income – if you earned no income, then you pay no tax on the first $18,000 and then the applicable tax rate on the balance. Don’t waste your opportunity and get it wrong – see an accountant

      Reply

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    August 21, 2018 Robyn

    Hi Michael,
    We purchased a rental property in 2014 with the intention to make it our primary residence when my husband retires from the defence force which will happen in the next 6months.
    We have decided to live closer to our children which means selling this to buy something closer. As this would be our first primary residence are we able to avoid capital gain under these circumstances?

    Reply

      Michael Yardney

      August 21, 2018 Michael Yardney

      Sorry – this was never your primary place of residence so it can’t be excempt from CGT

      Reply

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    August 9, 2018 Joyce Lazar

    We migrated to Australia on a Contributory Parent Visa in 2016. For the past 2 years we have been living with our son. We now want to buy our own place and move out. For this we plan to sell a property we own in India and with the sale proceeds purchase a unit for ourselves in Australia. Will I be liable to pay capital gains tax in Australia for the money I bring in? Especially since I do not own any prproperty in Australia and we will be residing in the unit we buy.

    Reply

      Michael Yardney

      August 10, 2018 Michael Yardney

      I’m not an accountant – but I believe CGT is for the sale of your assets here – not overseas

      Reply

    Avatar

    July 24, 2018 Aj

    Hi Michael
    I have just sold a property and make a good capital gain. this Rental property was on our personal names so My question is
    Can i use that Capital gain money to buy another property on different structure like trust, as only us two (Same owners) will be trustee
    cheers
    Aj

    Reply

      Michael Yardney

      July 24, 2018 Michael Yardney

      This money is now yours and if you set up a trust you can lend or gift the funds to the trust. Get your accountant’s advice

      Reply

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    July 24, 2018 Jozef Zygadlo

    My wife and I built our house in 2001 ($160K) and lived in it till 2017 (est $450K) when we moved overseas and rented the house out. Could you please advise me if CGT is applicable if I were to sell the property after July 2019 an estimate how much CGT would be payable. I’ve been reading conflicting reports. Thank you.

    Reply

      Michael Yardney

      July 24, 2018 Michael Yardney

      Jozef – sorry – we can’t estimate your tax liabilities on line – that would be irresponsible, but if you have still claimed it as your PPOR as you have no other home in Australia it is possible their will be no CGT at all;

      Reply

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    July 23, 2018 John

    Hi. I bought a house in 2011 and lived in it until 2013 where i then moved back in with my parents. In 2013 i made it a rental property. In 2015 I moved out of my parents house and purchased another house and made it my PPOR. In 2017 i sold the rental property.
    My understanding is that i calculate capital gains between 2015 and 2017.
    My question is can i still offset this gain by deducting conveyancing fees, stamp duty etc i paid when i purchased the property in 2011?
    Thanks

    Reply

      Michael Yardney

      July 25, 2018 Michael Yardney

      Hi John
      The capital gain or indeed capital loss is calculated by subtracting the net sales proceeds from the purchase price including all buying costs and any renovations etc (cost base). How much tax you pay on the gain is dependent on a variety of factors. If it is your main residence for tax purposes and passes all the tests then no tax. If the property was partly used as an investment then that part of the gain will be subject to tax. Do not forget to add back capital works depreciation to reduce the cost base.

      Ken Raiss
      Metropole Wealth Advisory

      Reply

    Avatar

    July 22, 2018 Annie Banbury

    I bought a house in 1998 and lived in it until 2008 when I rented it out. My understanding is that if I sell it now, I need to pay CGT from 2008. Between 1998 to 2008 I made some improvements to the house such as a loft conversion and a new kitchen. Can these improvement costs from before the rental period be taken into account when calculating the gain?

    Reply

      Michael Yardney

      July 23, 2018 Michael Yardney

      Annie – it is possible that you will pay less CGT than you think – if you haven’t nominated a different PPOR you could get 6 years reprieve on your tax – this is the time to see a proficient accountant and sort out your situation

      Reply

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    July 21, 2018 Mary

    Hi. My parents purchased a holiday house prior to CGT, where myself, my two brothers my mum and dad were all on the title. Ie 5 names at 5 equal shares. In 2006 mum and dad gifted their 2 shares to the 3 kids. If we sell the house… do we only payCGT on the acquired shares in 2006? Or the entire value? Help!!:(

    Reply

      Michael Yardney

      July 21, 2018 Michael Yardney

      Mary – please check with your accountant but you should not have to pay CGT on the portion you owned before CGT was introduced

      Reply

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    July 1, 2018 Pam M

    In 2001 I purchased a house for $160K plus costs. I lived in this house as my PPOR until 2007, when I moved out and started renting it out. In 2007 the house and land had an estimated value of $350-$400K. I am now demolishing the house, land value is now approx $400K. I will subdivide the property into 2 and build 2 new houses. The building costs are approx $250K for each house plus demolition costs of $10,000. Once the houses are built, if I sell one, how do I calculate CGT? I understand a CGT event occurs when I sell, but how will the cost base be calculated? Would appreciate your general advice please.

    Reply

      Michael Yardney

      July 2, 2018 Michael Yardney

      Pam – how much tax you pay and which tax you pay will depend on how you document your intentions – in other words were you always planning to sell part of the completed development. Invest in some smart tax advice – it will be worth it

      Reply

        Avatar

        July 12, 2018 Lincoln

        What if Buy a place in 2011 april. Live in it and then rent it in 2012 August out till i sell it. I sell it says after august 2018 . what tax will i be up for. taking in the cost of selling and buying yada yadda?

        Reply

          Michael Yardney

          July 12, 2018 Michael Yardney

          Lincoln – I’m not an accountant, but if you’ve documented things correctly and not claimed any other residence as your principal place of residence it is likely the 6 year rule would apply and you would not have to pay capital gains tax.

          Reply

    Avatar

    June 20, 2018 Christopher Hall

    If you purchase your first property and live in it for 6 months, but within that time you have got plans to demolish and subdivide, will you still be exempt from capital gains tax, if you sell the newly created lots?

    Reply

      Michael Yardney

      June 20, 2018 Michael Yardney

      Chris – you have now created a new property – and clearly he intention wasn’t to keep the property as your primary place of residence.
      Selling a property within 12 months doesn’t even allow you to receive the 50% CGT exemption

      Reply


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