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More than one in five first time buyers are buying an investment property
Topic Started: 21 Aug 2014, 02:52 PM (2,644 Views)
Sydneyite
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zaph
22 Aug 2014, 11:37 AM
I wonder how many move in for a brief period to make it possibly exempt from CGT?
That's the sort of thing I was thinking of......
For Aussie property bears, "denial", is not just a long river in North Africa.....
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b_b
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Sydneyite
22 Aug 2014, 11:43 AM
That's the sort of thing I was thinking of......
Beyond pro-rata GCT relief, how can temporarily moving in help?
https://www.ato.gov.au/General/Capital-gains-tax/Your-home-and-other-real-estate/Selling-your-home/

(S – I) + (T - G) + (M - X) = 0
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propertymogul
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b_b
22 Aug 2014, 11:50 AM
If you buy the property with the intention to live in it, live in it for an undefined period but to be safe normally at least 6 months, you can then rent it out for up to 6 years from memory, move back into it and still get the full CGT exemption.
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Count du Monet
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Quote:
 
Property investment is proving increasingly popular with Australians, with new research showing a jump in the number of people opting to buy an investment property before an owner-occupied dwelling.


For the next 5 years they will be wasting their money! :D
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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b_b
22 Aug 2014, 11:50 AM
What PropertyMogul said - look up "The 6 Year Rule".

PS; I always wondered how this exemption came about, and why 6 years? I reckon it's no co-incidence that 6 years happens to be two Commonwealth parliamentary terms :-)
For Aussie property bears, "denial", is not just a long river in North Africa.....
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b_b
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propertymogul
22 Aug 2014, 11:55 AM
If you buy the property with the intention to live in it, live in it for an undefined period but to be safe normally at least 6 months, you can then rent it out for up to 6 years from memory, move back into it and still get the full CGT exemption.
I understand that only applies if you are "unable" to live in the property for GCT relief period. i.e.: work inter-sate or overseas or hospitalised etc.

I do not believe you can live across the road from your investment property, and claim 6 years of full GCT deduction just because you lives there for six months. Th best you can hope for is 1/12th of any gain quarantined for exemption.

Happy to stand corrected if anyone here is a tax specialist.
Edited by b_b, 22 Aug 2014, 12:02 PM.
(S – I) + (T - G) + (M - X) = 0
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propertymogul
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b_b
22 Aug 2014, 12:00 PM
I understand that only applies if you are "unable" to live in the property for GCT relief period. i.e.: work inter-sate or overseas or hospitalised etc.

I do not believe you can live across the road from your investment property, and claim 6 years of full GCT deduction just because you lives there for six months. Th best you can hope for is 1/12th of any gain quarantined for exemption.

Happy to stand corrected if anyone here is a tax specialist.
As far as I know there are no hard and fast rules on where or why you move out. Obviously you can't claim another place as PPOR during that period though. The ATO provide some examples for reasons but they're not legislated.

https://www.ato.gov.au/Media-centre/Articles/Moving-on--Remember-the-six-year-rule-for-CGT/?page=1#The_property_must_have_been_your_main_residence

Not a tax specialist but that is my understanding.
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b_b
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propertymogul
22 Aug 2014, 12:06 PM
As far as I know there are no hard and fast rules on where or why you move out. Obviously you can't claim another place as PPOR during that period though. The ATO provide some examples for reasons but they're not legislated.

https://www.ato.gov.au/Media-centre/Articles/Moving-on--Remember-the-six-year-rule-for-CGT/?page=1#The_property_must_have_been_your_main_residence

Not a tax specialist but that is my understanding.
Yep - that link is pretty consistent with what I wrote.

It's not that easy to covert an investment property to GCT exempt status. The ATO is not into charity.

First time buyers really should ditch the whole NG idea especially if they are renting in the same city. The best tax break is for PPOR unless you believe property will crash - then simply stay out of the market.
Edited by b_b, 22 Aug 2014, 12:12 PM.
(S – I) + (T - G) + (M - X) = 0
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propertymogul
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b_b
22 Aug 2014, 12:11 PM
Yep - that link is pretty consistent with what I wrote.

It's not that easy to covert an investment property to GCT exempt status. The ATO is not into charity.

First time buyers really should ditch the whole NG idea. The best tax break is for PPOR unless you believe property will crash - then simply stay out of the market.
Basically what I've seen in practice is that people will do exactly that. They will buy, move in for a short time, then rent it out and either move back in with the pairs or rent somewhere else. As long as the "intention" is to live in the PPOR when you purchase it, you are complying with the legislation. When they sell they simply don't pay any CGT on the sale, claiming PPOR. It really is that easy, until they change the legislation. Sydneyite may be right on the reason for the 6 years, it may be in there for the benefit of politicians.

It would be up to the ATO to show that they didn't comply with the legislation. Since there are no restrictions in the legislation as to where and why you move out of the PPOR, it would be difficult for them to mount a case against you.
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skamy
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Young people in a city like Sydney cannot afford to buy in the location they want straight away so rather than buying a home further out they buy an IP, they gain rent and tax relief via negative gearing to help them with the first few years of leasing. They can then use equity in the IP plus income, if it is positively geared, to get the PPOR. Even if they sell they will have capital gains that they did not have before purchasing whether or not it gets taxed.

If the eejits marching in Melbourne get their way this will be one less way available to young people on lower incomes to get on the property ladder.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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