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PPR used to earn income

Initiate

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Replies 2

Hi Guys,

 

I appreciate any guidance in advance.

 

I have a client that has a three storey Unit Complex , they purchased it Sept 2014 and they have been living in the top two levels since. Main purpose, PPR.

 

The bottom level has been rented for on and off say for 4.5 years in total. The first tenant was renting from March 2015 and there are gaps of 6 months here and there of it not being rented at all.  While there was no tenant I believe they used the bottom floor for themselves.

 

My client is looking at selling soon and was under the understanding from a previous accountant that the 6 year PPR rule was available and thus have not CGT Issues.

 

My understanding of the legislation is that the property will be partially subject to CGT as they did not move out of the property.

 

This would be my rough calc with fictitious figures

 

Bought 2014    $800,000

 

MV at March 2015 (first rented)          $900,000

 

Sold Sept 2021                $1,600,000

 

Floor space rented 30%

 

Total time available for rent 4.5yrs / 7yrs = 64.28%

 

 

Capital Gain = $1,600,000 – $900,000 X 30 % floor space  X 64.28% time available for rent.

 

 

=  134,988 Gross,  67,494 Net, 50% share of net = 33,747 to be included in each of their tax returns as assessable income 18A ?

 

On the right track  ? 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 1

Hello @DavidCook,

 

You are on the right track!

 

When you say your client has a three storey unit complex and they lived in the top two stories, I am assuming there are not multiple units with subdivided titles. If this is the case only one of these titles can be the client's main residence.

 

The two rules we are looking at in your example are the:

Your client is not able to claim the 'continuing main residence status after moving out' rule. This is because you cannot claim a main residence exemption for any part of your home you use to produce an income while you are living in it. 

 

You are correct, in this situation the 'home used to produce income' rule applies.

 

You have also provided an accurate example of how to calculate the assessable capital gain using this rule and apportioning the floor space.

 

For more information please see heading: If you use your home to produce income and then stop living in it in the Home used to produce income link provided above. 

2 REPLIES 2

Most helpful response

ATO Community Support

Replies 1

Hello @DavidCook,

 

You are on the right track!

 

When you say your client has a three storey unit complex and they lived in the top two stories, I am assuming there are not multiple units with subdivided titles. If this is the case only one of these titles can be the client's main residence.

 

The two rules we are looking at in your example are the:

Your client is not able to claim the 'continuing main residence status after moving out' rule. This is because you cannot claim a main residence exemption for any part of your home you use to produce an income while you are living in it. 

 

You are correct, in this situation the 'home used to produce income' rule applies.

 

You have also provided an accurate example of how to calculate the assessable capital gain using this rule and apportioning the floor space.

 

For more information please see heading: If you use your home to produce income and then stop living in it in the Home used to produce income link provided above. 

Initiate

Replies 0

Appreciate it, thank you Kara !