Capital Gains Tax on a newly built house? Help?
Mar 30th 2004, 3:09 am
#1
home again, home again
Thread Starter
Joined: Apr 2003
Location: Notts to Perth, Perth to Notts
Posts: 1,748
Capital Gains Tax on a newly built house? Help?
I have a friend who is building a new house here in Perth.
The question is:
Do they have to pay capital gains tax if the property is never lived in and they decide to sell it?
It is their only home and they are renting whilst the property is being completed.
Any help Please!!
The question is:
Do they have to pay capital gains tax if the property is never lived in and they decide to sell it?
It is their only home and they are renting whilst the property is being completed.
Any help Please!!
Mar 30th 2004, 5:05 am
#2
Rocket Scientist
Joined: Aug 2003
Location: Dreamland AKA Brisbane which is a different country to the UK
Posts: 6,911
AFAIK, the answer is yes. The only exemption is on a house you have lived in as primary place of residence for at least 12 months. I think view it the same as someone buying a house, renovating it & selling it again. To the tax office its no different. Someone may be more knowlegable & say differently, but I think Im right.
Something else to check up on is the stamp duty side of it. Here in Qld you get a reduction in stamp duty if you buy a property as your residence, but you must live in it for 12 months & take up residence within a certain amount of time (6 months? not sure). You sign a statement when you buy, if you sell etc within the 12 month you have to pay back the money. Every states stamp duty laws are different, that applies in Qld, but it might be worth checking if it or anything similar applies in WA.
Something else to check up on is the stamp duty side of it. Here in Qld you get a reduction in stamp duty if you buy a property as your residence, but you must live in it for 12 months & take up residence within a certain amount of time (6 months? not sure). You sign a statement when you buy, if you sell etc within the 12 month you have to pay back the money. Every states stamp duty laws are different, that applies in Qld, but it might be worth checking if it or anything similar applies in WA.
Mar 30th 2004, 5:28 am
#3
Guest
Posts: n/a
W.A. have a reduction and a concession for Stamp Duty, but the limits are pretty low, so its unlikely to apply.
A reduction of $500 or the amount of duty payable, whichever is the lesser, may be available with respect to the acquisition of a person's first home, or the acquisition of vacant land where a person is building their first home.
The rebate is available -
Where the value of the vacant land is not greater than $72,000 or,
where property with a dwelling house situated below the 26th parallel does not have a value greater than $185,000 or,
where property with a dwelling house situated above the 26th parallel does not have a value greater than $277,500.
A concessional assessment of stamp duty may be available for the purchase of a residence or business undertaking if the value of the dutiable property does not exceed $135,000.
CGT is, as Mrs D says, payable.
The profit, after all buying and selling costs is added to the Owners personal income, and will be taxed at whatever tax bracket rate applies, and medicare levy is also added.
The rate could be as much as 49.5%. It may be worth looking into whatever other options are available.
ATO CGT link
A reduction of $500 or the amount of duty payable, whichever is the lesser, may be available with respect to the acquisition of a person's first home, or the acquisition of vacant land where a person is building their first home.
The rebate is available -
Where the value of the vacant land is not greater than $72,000 or,
where property with a dwelling house situated below the 26th parallel does not have a value greater than $185,000 or,
where property with a dwelling house situated above the 26th parallel does not have a value greater than $277,500.
A concessional assessment of stamp duty may be available for the purchase of a residence or business undertaking if the value of the dutiable property does not exceed $135,000.
CGT is, as Mrs D says, payable.
The profit, after all buying and selling costs is added to the Owners personal income, and will be taxed at whatever tax bracket rate applies, and medicare levy is also added.
The rate could be as much as 49.5%. It may be worth looking into whatever other options are available.
ATO CGT link
Last edited by ABCDiamond; Mar 30th 2004 at 5:42 am.
Mar 30th 2004, 8:56 am
#4
BE Forum Addict
Joined: Jan 2003
Location: Brisbane
Posts: 1,576
Agree with the others, but would strongly recommend hanging on to the house for 12 months or more as then you are taxed on only half the gain ie. at 25%.
Not sure if the 12 months counts from when you bought the land or from when house is finished. By the way the stamp duty for investment and to live in is the same in WA as I learnt from another post.
Not sure if the 12 months counts from when you bought the land or from when house is finished. By the way the stamp duty for investment and to live in is the same in WA as I learnt from another post.
Mar 30th 2004, 12:28 pm
#5
Guest
Posts: n/a
Jane
I've just gathered some info together for you, it would be worth looking further into this, and discussing wth a "Good" Accountant.
The ATO allows you to rent out your PPOR for up to six yrs without incurring any CGT. However, the ruling states that whilst you are renting out your PPOR you cannot be living in another PPOR.
If you rent it out first and then choose to live in it as your PPOR, you are only entitled to a partial CGT exemption. This is a percentage of time spent as rental against time as PPOR.
but what if you stay in it first then rent it out? Can you avoid paying cgt if you stay in a rental property after leaving the PPOR and is that the 6 years max before this becomes void?
yes if you decide this is your main residence and elect that is exempt from CGT. You can rent it for up to six years, live in it again and then the six year exemption will start again. The deciding difference is living in the property first.
Correct in that the residence needs to be purchased with the intention of using it as a PPOR in the first place, to qualify for a CG exemption. However, providing you follow the guidelines set down (ie no other PPOR whilst you're renting out your own PPOR, as you can only ever have one at a time!) there shouldn't be a problem.
From my understanding of what I've read, you can stay in it for a couple of nights simply to establish it as your PPOR, then rent it out for up to 6 yrs.
I've just gathered some info together for you, it would be worth looking further into this, and discussing wth a "Good" Accountant.
The ATO allows you to rent out your PPOR for up to six yrs without incurring any CGT. However, the ruling states that whilst you are renting out your PPOR you cannot be living in another PPOR.
If you rent it out first and then choose to live in it as your PPOR, you are only entitled to a partial CGT exemption. This is a percentage of time spent as rental against time as PPOR.
but what if you stay in it first then rent it out? Can you avoid paying cgt if you stay in a rental property after leaving the PPOR and is that the 6 years max before this becomes void?
yes if you decide this is your main residence and elect that is exempt from CGT. You can rent it for up to six years, live in it again and then the six year exemption will start again. The deciding difference is living in the property first.
Correct in that the residence needs to be purchased with the intention of using it as a PPOR in the first place, to qualify for a CG exemption. However, providing you follow the guidelines set down (ie no other PPOR whilst you're renting out your own PPOR, as you can only ever have one at a time!) there shouldn't be a problem.
From my understanding of what I've read, you can stay in it for a couple of nights simply to establish it as your PPOR, then rent it out for up to 6 yrs.
Mar 30th 2004, 11:49 pm
#6
BE Forum Addict
Joined: Jan 2003
Location: Brisbane
Posts: 1,576
Yes I agree with most of what you say excect this bit.
I've never seen a min period that you have to live in it, but if the taxman audits you you would have to prove that you lived in it as your PPOR and this would involve produceing electricty bills, phone bills, etc under YOUR name for the property.
You MIGHT get away with it once but I wouldn't try it twice as if they caught you the second time they might look very closely at your first claim and if that is thrown out you could be looking at substancial penalties.
Originally posted by ABCDiamond
From my understanding of what I've read, you can stay in it for a couple of nights simply to establish it as your PPOR, then rent it out for up to 6 yrs.
[/I]
From my understanding of what I've read, you can stay in it for a couple of nights simply to establish it as your PPOR, then rent it out for up to 6 yrs.
[/I]
You MIGHT get away with it once but I wouldn't try it twice as if they caught you the second time they might look very closely at your first claim and if that is thrown out you could be looking at substancial penalties.
Mar 30th 2004, 11:58 pm
#7
Guest
Posts: n/a
Originally posted by Kiwipaul
Yes I agree with most of what you say excect this bit.
I've never seen a min period that you have to live in it, but if the taxman audits you you would have to prove that you lived in it as your PPOR and this would involve produceing electricty bills, phone bills, etc under YOUR name for the property.
You MIGHT get away with it once but I wouldn't try it twice as if they caught you the second time they might look very closely at your first claim and if that is thrown out you could be looking at substancial penalties.
Yes I agree with most of what you say excect this bit.
I've never seen a min period that you have to live in it, but if the taxman audits you you would have to prove that you lived in it as your PPOR and this would involve produceing electricty bills, phone bills, etc under YOUR name for the property.
You MIGHT get away with it once but I wouldn't try it twice as if they caught you the second time they might look very closely at your first claim and if that is thrown out you could be looking at substancial penalties.
If you lived there for only a few days, you may need good proof of why you decided against that house to live in.
I will emphasis again, just to cover myself, discuss this option with a "Good" Accountant
