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Tax implications of changing PPOR to an investment property

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Cate | 02 May 2013, 04:43 PM Agree 0
I have a question about CGT. I bought my previous PPOR in December 2000 and moved into it as soon as settlement was complete in February 2001. This was the only house I owned.

In September 2001, I went to the UK for 4 months to visit my family and rented the house out while I was away. The house was rented out two more times while I was in the UK - for 3 months in 2006 and for a year in 2008.

In January 2011, I bought a new house, which I moved into in April 2011 and I used my old house for short term lets while I tried to sell it. Unfortunately, the market was slow and it didn’t sell until March 2012, more than the 6 months allowed by the ATO to have both properties exempt from CGT.

I asked my accountant in early 2011 before I moved into the new PPOR, what the implications would be for CGT if it took longer than 6 months to sell the old house, and he assured me that the base valuation from which CGT is calculated would be taken at the time my old PPOR turned into an investment property (i.e. 2011). However, he is now saying that the valuation needs to be taken at the time I first rented it out in 2001.

I cannot see how this can be correct as there is no doubt that it was my PPOR for ten years and the only times it was rented were when I was overseas visiting family.

Can someone please help me with this as the property has increased a hell of a lot since 2001 but it actually dropped in value between 2011 and 2012, so if the valuation is taken from when the house ceased to be my PPOR it will save me a lot of tax.
  • Bri | 27 Jul 2014, 12:39 AM Agree 0
    Hi Cate,
    Not sure if you have managed to get this one sorted, however I'm just browsing through for information myself.
    If I have this correct, in the times you rented the property out they were short term rents and you moved back into the property when you returned.
    If this is correct there is a 6 year PPOR rule which can apply to alleviate the CGT - so each time you moved overseas and rented the premises as long as you moved back into it within 6 years and then left again it is exempt of CGT. Thus making your statement correct about when it was permanently rented in 2011 (however if you didn't own another PPOR at this time and lets say rented with someone else or moved in with family) then the whole time would be CGT exempt

    Just double check with another accountant as this was information from a tax course I did and I'm not trained - but using this method for part of my own property too
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