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Vand489(Dynamo)Dynamo
30 Oct 2023

Hello Everyone,


I am preparing a CGT Schedule for a PPOR Sold last year, I just want to make sure we are not making an mistakes in Tax Return.


Scenario:

  • Owner Bought house and land and Property was settled on 15/12/2015 and Owner lived in that Property for more than 17 months. ( Property was in NT ).
  • On 18/07/2017 Property was put on market for Rent, owner moved to QLD due to work and bought another property to live.
  • After about 5 Years, Rental Property was sold and settled on 27/08/2022 ( contract date was 20/06/2022)


Questions :

  •  New Market value : it will be calculated from the day it was first rented so when calculating Market Value, we are going to need a new building value and land value, We got building value as part of the Building Depreciation Report(Total re-Assessed Construction Costs less ineligible plant and equipment from, new law 09/05/2017).


  • Land Value: Can we use land value when the land was purchase in 2015. Or do we need to get a new land value re-assessed from 18/07/2017 (date first rented). Do we need to engage a quantity surveyor? or it is possible to get a historical land value from NT Land Title Office.


  •  6 Years Rule: Since owner has lived in property for more than 12 months and property is sold within 6 Years. Is owner eligible for 100% CGT Discount ? or 50%, and how do we apply 100% in CGT Schedule in Tax Return .


  • Division 43 – Capital Work Allowance and Cost Base Reduction: Owner has been claiming capital work deduction (Building Depreciation) In last 5 tax returns which amounted to $33,000, Do we need to reduce the cost base by this total amount.


  • CGT Event - Contract Date or Settlement Date: We take CGT Event as of contract date (20/06/2022) , not a settlement date ( 27/08/2022 ), it falls into a different financial year.


Thank You so much in advance. 

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7 replies
466 views
7 replies

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Taxduck(Taxicorn)Taxicorn
30 Oct 2023

You can use the 6 year rule. Rented for less than 6 years so can be considered your main residence. Be aware that you can only have one main residence at the same time so if you sell your current home that will be subject to CGT for the period the sold property was rented.

Contract date is used for the disposal date. So that was the 2022 tax year.

If you are claiming main residence exemption (as under 6 year rule) then you don't make any calculations. Simply tick the box that says you had a capital gain event then apply the main residence exemption as listed under the exemptions available.

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Most helpful reply

Taxduck(Taxicorn)Taxicorn
30 Oct 2023

You can use the 6 year rule. Rented for less than 6 years so can be considered your main residence. Be aware that you can only have one main residence at the same time so if you sell your current home that will be subject to CGT for the period the sold property was rented.

Contract date is used for the disposal date. So that was the 2022 tax year.

If you are claiming main residence exemption (as under 6 year rule) then you don't make any calculations. Simply tick the box that says you had a capital gain event then apply the main residence exemption as listed under the exemptions available.

Vand489(Dynamo)Dynamo
31 Oct 2023

Thank you for your quick reply @Taxduck


Just curious what happens to the CGT Loss ? if full CGT exemption is applied now on rental property.


assuming if we still need to prepare CGT Schedule to work out CGT Loss to carry forward ,where owner elect to keep QLD home for Full CGT exemption purpose to sell it in future.


Does owner still get 50% CGT Discount on rental property in NT which is sold.


and how we generally go about market value of building and land , and Division 43 capital allowance in calculation.


  • Market Value : how we go about building and land value


  • Division 43 : which is depreciation of building, claimed over the 5 years , Do we need to to reduce this capital allowance $33,000 from the cost base.


Thank You so much really appreciate it.


Taxduck(Taxicorn)Taxicorn
31 Oct 2023

How on earth do you get a loss on property between its value in 2017 to sale in 2022? Your situation is more complex than I assumed.

Yes, need market value of property when first income producing (rented). If audited by ATO you need to show how you estimated it's value. If they don't accept your estimate you would require a quantity surveyor to do it.

Any depreciation of building claimed off rental income needs to be taken off cost base.

The 6 year rule is not mandatory. If you made a loss then only way to claim in future years is to calculate the loss and enter on tax return.

You can only get the 50% discount on gains, not losses.

One other thing, you mention building and land. The main residence exemption is only available on dwelling and land up to 2 hectares. See this link..https://www.ato.gov.au/Individuals/Capital-gains-tax/Property-and-capital-gains-tax/Your-main-residence---home/Home-on-more-than-2-hectares/

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Vand489(Dynamo)Dynamo
31 Oct 2023

Thank you for your quick reply @Taxduck


How on earth do you get a loss on property between its value in 2017 to sale in 2022? Your situation is more complex than I assumed.


it is actually very simple, purchase price including other costs (stamp duty , legal costs , real state agent fees etc ) are higher than selling price (and no capital growth), now after reducing the cost base by capital allowances claimed, property will be in a little capital gain.


Yes, need market value of property when first income producing (rented). If audited by ATO you need to show how you estimated it's value. If they don't accept your estimate you would require a quantity surveyor to do it.


Yes, building depreciation report from the quanity serveyor company was done in 2017, when owner moved out, which has building value but apparently doesnt have land value in the report.

thats the reason we asked this in original question , how we go about it, do we use land value from 2015 (when purchased), or from NT land tile office (from land tax) . or a new retrospective building report to be done by quantity surveyor.


Please be assured, we will substantiate and provide all supporting documents to ATO. and the whole purpose for asking questions here is so we dont any mistakes in CGT calcuations.


ATO has really helpfull reading, like one here https://www.ato.gov.au/Individuals/Capital-gains-tax/Calculating-your-CGT/#HowtocalculateyourCGT


Thank You really appreciate it

Vand489(Dynamo)Dynamo
31 Oct 2023

@Taxduck

By taking the value of the property when first rented as the cost base, you aren't able to add purchase costs. i.e stamp duty, legal costs.


thats interesting to know, I havent come across this actually. would you mind sharing a link to relevant tax law/ATO link so i could read more about it.


we will only take associated costs to the sale of the property only,


i will really appreciate if you answer my question related to land value - if you dont know that is fine.


Thank You



Taxduck(Taxicorn)Taxicorn
31 Oct 2023

@Vand489

Sorry can't find that. All I can say is that any costs associated with purchase, holding or maintaining a residence before it is rented is a private expense. Only from the time it is rented does CGT apply, that's why the cost base is the value of the property when first rented.

Can't advise on what you should use for market value.

This ATO link explains market value of assets.

https://www.ato.gov.au/Individuals/Capital-gains-tax/Market-valuation-of-assets/

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