Hi Tax Expert,
I have read lots of answers on ATO Community and read the Rental Property Guide, Karl & Louisa case on the ATO website however I still have some questions relating to my situation.
I would appreciate if you could have a look at the following scenario:
2013 – Investment Property purchased for $235,000 (property built in 2007), it was rented out from the start.
May 2021 – I sold my main residence and moved into this Investment Property immediately after the sale of the main residence. I genuinely established this as a new Main Residence (moved my belongings, changed electricity, address with all providers, etc). Market Valuation on the property at that time $340,000. However due to many obstacles, including my poor health, I had to move in with my relatives into their place.
August 2021 – stopped living in my Main Residence.
Mid-August 2021 to Now – Having moved in with my relatives, I started to rent this property out again but I still treat it as my Main Residence because I have not established any other place as my Main Residence and don’t have and don’t own any other MR during that time.
My Cost Base calculation, given a 6 year rule exemption on main residence commencing in May 2021 is presented below but I am not 100% sure.
IF I dispose of the property in the near future, will my Cost Base look like the below?
Do I use the original purchase price of the investment property purchased for $235,000 in 2013, OR the market valuation price in 2021 when it became my MR?
A + B + C + D – E – F = Cost Base
A - is a purchase price (as the property became MR, market valuation as at 2021 was) $340,000
B – the cost of purchase (like Stamp Duty etc) $14,000
C – the cost of property improvements $0
D – legal fees $0 (at present)
E+F – capital work deductions+depreciating assets (Div 40+Div 43) $67,000 (claimed over the years from 2013-2023 as per depreciation schedule completed by property survivors)
$340K + $14K + $0 +$0 - $67K
My Cost Base is $287K
Further Questions:
1. Should I include in the Cost Base depreciation claimed over the years or only up to 2021 (the time when I started using property as my main residence)?
2. Do I need to inform the ATO that I established my new PPOR (which previously was an investment property)? At what point of time do I need to do that? If this hasn’t been done in 2021, can I do it now?
Much appreciated for your time.
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