Loading
This thread is archived and the information may not be up-to-date. You can't reply to this thread.
shower017(I'm new)I'm new
28 July 2024

Hi,


I'm planning to move into my investment property that I bought about 7 years ago and has been rented from the beginning.

This house will become my PPR and it requires substantial renovations (over 200k) before I can move in.

I understand that CGT / MRE are pro rata based. I just can't figure out the implications of substantial renovation to CGT / MRE.

For example, if

  • it was bought on 01/01/2018 and rented until 31/12/2024 (7 years)
  • purchase price was 500K
  • renovation starts at 01/01/2025 and finished by 31/03/2025 (3 months) and cost was 200K
  • it become my PPR on 01/04/2025 until 31/03/2032 (7 years) and sold for 1.2M

in this situation, can the renovation cost (i.e. 200K) directly reduces my NET profit?

like Net profit = 1.2 M - 500K - 200K - expenses (stamp duty + legal fees + etc)

or only the half (i.e. 100k) will be applied because I lived 50% of the period?

or none of above?


(I'm aware of CGT discount (50%) over 1 year and so on. this question is mainly about how the renovation cost that I will spend after tenant has moved out and before I move in, can reduce CGT)


Thanks in advance and look forward to hearing your advice!

1,019 views
1 replies
1,019 views
1 replies

Most helpful response

Most helpful reply

Taxduck(Taxicorn)Taxicorn
29 July 2024

All costs on the property can be included in the cost base for CGT calculation. Even those costs now that the property is your main residence. This is because of the way CGT is calculated. The formula for calculation is:

Sale price - cost base = gain x (days rented/days of ownership)

See elements of cost base

Cost base of assets | Australian Taxation Office (ato.gov.au)

Renovation costs part of 4th element.

All replies

Most helpful reply

Taxduck(Taxicorn)Taxicorn
29 July 2024

All costs on the property can be included in the cost base for CGT calculation. Even those costs now that the property is your main residence. This is because of the way CGT is calculated. The formula for calculation is:

Sale price - cost base = gain x (days rented/days of ownership)

See elements of cost base

Cost base of assets | Australian Taxation Office (ato.gov.au)

Renovation costs part of 4th element.

Loading
Claiming renovation costs as CGT deduction | ATO Community