Capital Gain Tax - over 6 years

Lhth168 on 18/03/2023 - 16:20

I’ll call the ATO on Monday to ask, but for now just want to hear from the community.

Wife and I bought a property in 2012 (Property A). Moved in right away and lived there until July 2016, when we moved to another property of ours. We rented out Property A ever since.

So it has been 6 years and 8 months since we moved out of property A. Now we’re selling it. If we had sold it within 6 years we might have been able to claim the 6 year rule exemption (if I understand it correctly), but we’re now 8 months over 6 years.

Question, will I be liable for the full CGT, or can I claim the 6-year rule and only pay CGT pro-rata for the 8 months?

Thanks.

Financial

Comments

  • loulou1 on 18/03/2023 - 16:51

    https://www.ato.gov.au/individuals/capital-gains-tax/property-and-capital-gains-tax/your-main-residence-(home)/treating-former-home-as-main-residence/ Scroll down to Royal’s example

    • HardQuiz on 18/03/2023 - 17:58

      Bloody royals are everywhere.

    • MITM on 19/03/2023 - 10:33

      Broken link

      • loulou1 on 19/03/2023 - 13:23
        -1

        https://www.ato.gov.au/individuals/capital-gains-tax/property-and-capital-gains-tax/your-main-residence-(home)/treating-former-home-as-main-residence

  • JimmyF on 18/03/2023 - 16:56

    Question, will I be liable for the full CGT, or can I claim the 6-year rule and only pay CGT pro-rata for the 8 months?

    CGT will apply from the 'value' when you moved out to now…….

  • Lunarboogie on 18/03/2023 - 17:04
    +1

    You'll be up for something akin to CGT x 4/11 to reflect the period where you resided in the property × 0.5 for holding the property longer than 12-months.

    Or about 36k for every 100k in gains which you then x by whatever your marginal tax rate is to get to the final figure.

    • Donaldhump on 18/03/2023 - 20:00

      why 4/11?

      • FoxJump on 18/03/2023 - 20:43

        they lived 4 years
        theyve owned it 11 years

        • MITM on 19/03/2023 - 10:47
          +1

          They’d have to move back in for 12 months for CGT discount.
          And they miss out on the 6 year rule as it’s “up to” 6 years.
          CGT payable for 6.8 years growth calculated from value at 07/16 to 03/23.
          You may have to see a valuer to determine the value at 07/16.
          Followed by a quantity surveyor to determine 6.8 years of depreciation total if you haven’t already claimed it.

        • Donaldhump on 19/03/2023 - 15:55

          F… my brain was dead last night I was doing 6 months in a year.

          Yours sound right

  • bohn on 18/03/2023 - 17:38
    +3

    or can I claim the 6-year rule and only pay CGT pro-rata for the 8 months?

    You can still claim the 6 year rule, you will just need to pay something for the 8mths.
    Just remember, you can only claim one household at a time, so the other house you moved into cannot overlap when it comes time to sell.

    • leiiv on 18/03/2023 - 22:34

      This is the best answer.

  • MS Paint on 18/03/2023 - 18:34
    +1

    I’ll call the ATO on Monday to ask

    Surely you've been using an accountant all this time to maximise your IP taxation benefits?

    Give them a call. They will know.

  • Donaldhump on 18/03/2023 - 19:59
    +2

    no you won't lose full option just because you went over 6 years

    two options using basic prorated method (I think you can do more complex valuation methods if gain didn't increase proportionally every year)

    i'm going off these as rough dates and use straight prorated method.

    prop A purchased 01/07/2012 and moved in (68 months ago)
    prop B purchased 01/07/2016 and moved in (44 months ago)

    option A. sell prop A and and pay 8/68ths on 50% (5.8%). lose any CGT exemption on current place prior to 01/07/2022
    option B. pay 44/68ths cgt tax on 50% which is 32%. CGT free on prop B

    may have made mistake as did this quick, but hopefully gives you the idea, open to correction if someone thinks wrong

    • Donaldhump on 19/03/2023 - 15:54

      Edit, my brain was fried last night and was doing 6 months in a year

      It will 8/128ths instead of 8/68ths
      It will be 80/128ths instead of 44/68ths

      Not much diff anyway

  • MITM on 19/03/2023 - 10:32

    Did you get a valuation done July 2016 ?

    • hth168 on 19/03/2023 - 15:35

      No, didn’t know any better at the time.

      • Donaldhump on 19/03/2023 - 15:56

        Easy enough to get one back dated if it’s works out better

  • MITM on 20/03/2023 - 23:18

    How did you go with the ATO call ?

    • hth168 on 21/03/2023 - 16:53

      Thanks for checking.

      The ATO lady was lovely to talk to, but she was vague, couldn't answer my question, just read to me some paragraphs from the website. In the end she just referred me to the ATO web site.

      I'll wait and have the conversation with a tax accountant when the time comes. For now I think you guys have given me the answer already. Thanks.

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