Avoiding Capital Gains Tax

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Q: I am looking to purchase a house on the Sunshine Coast, to rent it out for a few years (negatively geared) and then eventually move in. I have been told that if I live in the property for at least six months, I can avoid investment stamp duty and Capital Gains Tax (CGT) if I sell. Could you please advise my options? This will be the second property I have purchased, as I have already bought and sold my own unit in Sydney. Thanks, Ingrid

A: There are two issues here.

Firstly, in regards to the first home-buyer’s Federal grant and the various state exemptions from stamp duty – if you have already owned a property that you lived in as your principal place of residence (PPOR), you will not be entitled to these grants and concessions.

In regards to CGT, if you purchase this property as your PPOR and you live in it for a period of time (six months is a reasonable period), and then move out and rent the property to a tenant, you have up to six years before this property will become subject to CGT – as long as you do not own or purchase another principal place of residence during this period. In relation to stamp duty, the purchaser pays the stamp duty not the seller, so you would have no stamp duty payable on sale.

- David Naylor

Ed Chan and David Naylor are the co-founders of Chan & Naylor, an accountancy firm that specialises in the areas of Asset Protection, Wealth Creation through property investing, Estate Planning and Tax Planning. The company ranks in the top BRW 100 Accountancy firms in Australia. For more, phone 02 9391 5400 or visit www.chan-naylor.com.au

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  • Anil KC says on 09/07/2012 10:44:17 AM

    01/01/2003 purchased first house as primarty residence cost $250K
    01/07/2006 rent it out. I had to move interstate for job.
    01/07/2006 valuation of house is $360K
    01/11/2010 purchased second house cost $ 410K, start to live in there
    01/07/2012 stop renting out first house and left vacant
    08/07/2012 sold first house at 410K
    my annual salary is 60K
    do i have to pay capital gain tax next year, if yes how much approximately

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