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Investment Property and Renting Elsewhere - CGT

Discussion in 'Business, Investment and Economics' started by arae, Nov 12, 2012.

  1. arae

    arae

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    I'm going to seek some advice from an accountant, but looking to gather a bit of information first.

    I plan to buy my first property. Yet, due to work commitments, I will rent it out to tenants, then rent another place to live in elsewhere, closer to my work.

    As I would own no other property, apart from the (partially) owned one I am renting out, would this incur any CGT on the eventual sale of the home?
     
  2. Bill M

    Bill M Self Funded Retiree

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    As far as I understand I believe you have to live in it first and establish it as your principle place of residence. Then after a certain amount of time (I don't know how long, 6 or 12 Months) you can move out and rent it to someone else. I believe you can rent it out for up to 6 years. I do not believe you will be CGT exempt if you rent it from day one. Please check everything, I am only repeating what was explained to me a few years ago by my accountant and that may have changed.

    Let us know what your Accountant thinks, cheers.
     
  3. arae

    arae

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    This information mostly correlates with what I have read as well Bill M. Although, the only unclear point is how long you need to initially 'live' in the principle place of residence before renting it out to qualify for the 6 year CGT exemption. If there is no official time period set, I wonder if a week, or month, for example would be sufficient until renting it out.
     
  4. Izabarack

    Izabarack

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    If you rent out the property without first establishing it as your Principal Place of Residence, you will be up for CGT at the time of sale. If you keep the property for more than 12 months before selling, then capital gains is assessed against 50% of the capital gain. Two tricks to be aware of - record and keep all the information on the costs of the property, including stamp duty and legals, second, the important date on sale is the date at which the sale contract is signed, not the date of settlement. As CGT rate is dependant on your tax rate in the FY of the CGT trigger event, the sale contract date establishes the FY in which CGT is due.

    Iza
     
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