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CGT implications re living in an investment property

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Newycoast | 14 May 2020, 11:16 AM Agree 0

Hi all,
I am new here so please be gentle....
Background: My partner and I own a number of properties together and seprately in NSW in Qld. The last couple of years we were living together in a rented premise in NSW.
Due to her work and current climate she is living in a property that she classes as her PPOR back in Qld.. (This property has been rented but we are well within the 6.5 years. (BTW - does anyone know what the ATO claims is a reasonable time for the owner to reside back in to restart the 6.5 year rule)
I have bought a property which I am renting out for 12 months which I class as my PPOR. When I renovate and sell it in a couple of years it will make more capital growth than the investment property plus my partner has no financial involvement in it nor me in hers.

We have now left the rented premises we were both living in and I have moved into one of our rental properties in NSW as this was vacated by a tenant and we wanted to do some renovtions to it. The renovations make the property unrentable due to excavation, access, etc. We are unsure on how long I/we will reside in this investment property, be it till upon completion of the renovations or some time after that, before either selling or renting it depending on answers.
I have a number of questions in relation to this.

Question 1. Are we or one of us able to claim any expenses such as bank repayments, rates, etc in relation to the investment property whilst we do do renovations? (If no is there anyway to make these claimable? Such as me renting off my partner who is living in Qld., etc?)

Question 2. The renovations are capital expenditure such as a carport, garage, new fencing and a large deck. Are we able to claim them off any CGT we pay when we sell the property?

Question 3. Does our residing in the property affect the CGT on the property or our current PPOR? If so how and what is the best way to reduce our CGT? For example we have owned it for 5 years in November this year, if we lived there for 5 years would it negate the CGT and if so what about our PPOF?

There is also the option of us moving out and residing elsewhere or renting during the renovation stage. But the investment property would remain empty due to the level of renovations.

I apologise for the length and possible confusion in advance..
  • Property88 | 14 May 2020, 12:47 PM Agree 0
    Hi there, your situation is quite complicated, I would definitely recommend you meet with an accountant who is experienced with property investors. The 6-year rule (not 6.5years) only allows you to have one PPOR at any given time, so living in your rental property to do renovations will complicate your CGT obligations. Generally speaking, you can not make a claim for any renovations when the property is not income-producing - but again, speaking to a qualified accountant is the best way to get personalised advice that relates to your specific situation. Best of luck!
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