FAQ 18 Where can I find out about CGT?

IF THERE IS AN INTENTION FROM THE OUTSET TO BUY AND SELL PROPERTY TO MAKE A PROFIT THEN CGT DOES NOT APPLY,  HOWEVER TAX ON PROFIT DOES APPLY. 

Please read FAQ 45

DO NOT CONTINUE TO READ THIS FAQ AS IT WILL NOT BE APPLICABLE.

If your intention is to Aquire a property to obtain an income from leasing then continue below.

The rules vary depending on whether you first earn income from a property and then move in, or whether you first establish a main residence that is exempt from capital gains tax, and then start to earn money from it e.g. from renting some or all of it. If the property is first rented and then you move in, the capital gain must be apportioned. If the situation were reversed and you earn income from a main residence after August 20, 1996, by renting some or all of it, then you must use market value to determine your cost base. You don\’t have a choice. For older homeowners who started renting out a post-1985 main residence i.e. one that is subject to CGT, before 1996, you can only use the apportion method.

To summarise:

1) Property is your PPR   – No CGT

2) Property was FIRSTLY your PPR then an investment – CGT calculated on Market Value

3) Property was FIRSTLT an Investment then occupied as your PPR – CGT calculated on a pro rate method.

To get a better understanding of the rules it can pay to visit the ATO website. Our friends at the ATO have provided some comprehensive information. Start at this link and follow through with your personal circumstances.

http://www.ato.gov.au/General/Property

http://www.ato.gov.au/General/Capital-gains-tax

Additional information can be accessed here:
http://www.bantacs.com.au/booklets/Capital_Gains_Tax_Booklet.pdf

Michael & Sara
Ultimate Coaches

The information supplied is general only and not intended to replace professional advice.