Hi everyone, I benefited and learnt a lot from this community and thank you for all your input. Considering myself tax savvy, I'm still caught out by this situation and need your advice:
Background: We are in Queensland. On 1 August 2016, we (me and partner) bought out PPOR (property A) for $500k in joint tenancy (50/50) and on 22 September 2021 we bought a new house (property B) for $850k in my name only as our new PPOR. We moved into property 2 on 22 October 2021 after settlement and rent out property A on 17 Jan 2022.
Plan: we intend to sell property A in 2027 (let's on 21st September 2027) using the 6-year rule, and sell property B in 2031 (let's on 21st September 2031). I understand that for property A, we don't need to pay CGT. But for property B, since we will use the 6-year rule for property A, during the overlapping period when we hold both, i.e., from 22 September 2021 to 21st September 2027 (6 years), property B will be treated as an IP; From 22 September 2027 (after property A is sold) to 21 September 2033 (until property B is sold), in these 6 years property B will be treated as our PPOR.
Question: when calculating CGT, let's say the property B will be sold for $1.85M with a capital gain of $1M. The capital gain apportioned for the CGT purpose after 50% discount will be $250k (half of the holding period as IP). My questions are:
- Since it's also my partner's PPOR, although only my name is on the title, will the capital gain be halved again to each of us for CGT purpose, i.e., each pays the CGT on $125k?
- If the answer to the previous question is no (I have to pay full CGT on the $250k because it's under my sole name when it's being treated as an IP), here's another senario: If I change the ownership from 100% in my name to joint tenancy (transfer duty free?) for property B, will the capital gain be halved to each of us for CGT purpose, i.e., each pays the CGT on $125k, as it's being held as joint tenancy when we sell it?
- If the answer to the previous question is yes, does the date to change the ownership (from 100% on my name to joint tenancy) have to be before the sale of property A? Or any date before the sale of property B is fine?
Hope to hear from you guys.
Best regards
Bart
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