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Re: Investment Property becomes PPOR, what Capital Gains are we liable on for if we sell?

Initiate

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Replies 6

Hi guys,

 

Thank you very much for helping me, I'll summarise my situation and hopefully someone knowledgeable can assist.

 

We purchased a property and had it rented out as an investment property in Nov 2003. Purchase price $305k.

The tenant moved out and we moved into the property and made it our PPOR in approx June 2013 and we are still living in it.

 

We are considering selling the property but would like to know approx Capital Gains we will be liable for and also if we can reduce this somehow. We estimate the property maybe worth $1m now.

 

I did some laymans research and heard the gains are calculated from the property value (date it was first rented out) to property value (the date we moved in)  so that would make it approx 2003 - 2013 then calculated the gains there? If this is the case, then how do we find the property value for back then ?

 

Thank you very much for helping me out on this and any info would be appreciated.

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Taxicorn

Replies 0

@Kim6 

 

Any decent professional valuer could give you a market value for any date:

 

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Market-valuations/Market-valuation-for-ta...

 

To help reduce Capital gains look at including all of the 3rd element costs:

https://www.ato.gov.au/general/capital-gains-tax/working-out-your-capital-gain-or-loss/cost-base/ele...

 

You will be able to deduct all of your costs of owning since moving back in.

 

Best to see a Tax professional to minimise and calculate accurately Capital Gains.

 

 

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Most helpful response

Taxicorn

Replies 0

@Kim6 

 

Any decent professional valuer could give you a market value for any date:

 

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Market-valuations/Market-valuation-for-ta...

 

To help reduce Capital gains look at including all of the 3rd element costs:

https://www.ato.gov.au/general/capital-gains-tax/working-out-your-capital-gain-or-loss/cost-base/ele...

 

You will be able to deduct all of your costs of owning since moving back in.

 

Best to see a Tax professional to minimise and calculate accurately Capital Gains.

 

 

Initiate

Replies 4

Thanks macfanboy for yr repsonse, I'll have a read.

 

Is there anyone from the ato that can explain if at least how I attempted to calculate the gains, is this the right way ? thanks in advance.,

Taxicorn

Replies 0

ATO Community Support

Replies 2

Hi @Kim6,

 

If the property was originally rented out then you will need to use the original purchase price when determining your cost base. If you then moved into the property and made it your main residence then the capital gains tax can be worked out and you can apply a partial exemption. The website advises - A × (B ÷ C)

Where:

A is the total capital gain from the CGT event

B is the number of days in your ownership period when the dwelling was not your main residence

C is the total number of days in your ownership period

You can use the Capital gains tax property exemption tool to calculate the percentage of your property that's exempt from CGT.

 

As @macfanboy also advised, you can also look at elements of the cost base when working out your capital gain or loss.

 

Links-

Partial exemption.

Working out your capital gain or loss.

Cost base.

CGT discount.

 

All the best.

 

Initiate

Replies 1

Hi,

I'm still having problems working it out. Can anyone help without just cut and pasting links? I'm just after an approx figure .

 

As I said,

Purchased property Nov 2003 $305k, rented out as investment property. 

Tenant moved out and we moved into the property and made it our PPOR in a June 2013 and we are still living in it. It's worth around $1.1m now, when we moved in it was worth around $600k

 

How do I calculate the capital gains if we sell now?

ATO Community Support

Replies 0

HI @Kim6

 

As @Jodie2 advised, you'll use the formula: total capital gain × (number of days property was not your main residence ÷ total ownership days).

 

To work our your capital gain, use the formula: total sale - cost base.

 

There's a lot that goes into the cost base. It isn't just the price you acquired the property for. It's also things like stamp duty, transfer fees, advertising, agent fees, valuations, and so on. You can look at Jodie's link for cost base for a further breakdown. In your example, though, it would look like: $1.1m - $305k = $795k for the capital gain.

 

To then work out your partial exemption, let's say the number of days the property wasn't your main residence is 1 November 2003 until 1 June 2013 (3,500 days). And your disposal date is 1 June 2021 (total ownership of 6,422 days). This makes your equation $795k × (3,500 ÷ 6,422) = $433k (as a rough estimate).

 

From there, if you're eligible, you can apply the discount method, which means your tax liability is reduced by your discount percentage (50% for individuals). This could make the capital gain taxed portion $216.5k. 

 

As has been said, capital gains is complex. You'll need to refer to the links provided to dive deeper into calculating it beyond this example.