Property & Finance

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  jv on 12/08/2024 - 22:57

  +5

  We have sold our PRP and are planning to move into our IP.

  I think you should CTU just after you release the PL, but make sure you don't KJT.

• 

  JDMcarfan on 12/08/2024 - 23:21

  1. Yes, speak to your solicitor and ask for their valuer. You need a professional opinion to stand with the ATO (and ANZ will not release their report, let alone do one for private purposes). I had one done over a year ago and it cost $300ish dollars (can spend $500 if you want a full site inspection, recommended if house is worn down).
     Mention to valuer/solicitor your situation and that you thus need a low(er) valuation for tax purposes and the valuer should be able to accommodate and provide something at the bottom of the realistic range.

  2. You should be getting financial advice on this. You haven't given enough info to give an informed opinion and this is too particular to your situation. How I see it:
     Property A: Former PPOR, now sold. No loan remaining.
     Property B: Former IP, soon to be PPOR. Has an IP loan against it, that will be converted to OO. You have sufficient cash on hand to pay this loan off?
     Property C: So called 'titled lot' that is fully paid off. Thinking of using excess cash to either pay off Property A or build a house on Property C? Is Property C a vacant lot?

  • 

    JDMcarfan on 13/08/2024 - 09:39

    +1

    1. I take back my response here. As @bemybubble mentioned, I did some digging after reading their comment (ATO private rulings), and you can only have CGT apportioned based on time PPOR vs IP if you have not moved into property as soon as reasonably possible. My comment above only applies when going PPOR -> IP
    • 

      bemybubble on 13/08/2024 - 09:51

      +1

      this is where the parties at my friend

• 

  happydude on 12/08/2024 - 23:29

  +2

  Pretty sure any capital gain is apportioned by time if going from IP to PPOR so you don't need a valuation. (you do going the other way)

  Confirm that though.

• 

  AustriaBargain on 12/08/2024 - 23:42

  -2

  Sell the land, buy a hotdog stand.

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  bemybubble on 13/08/2024 - 05:56

  +2

  1 - valuation is irrelevant. Won’t help you if you’re thinking it will for capital gains. Only time a market appraisal works is when you have a PPR which then switches to investment.

  2 - get an offset and offset the IP loan. Use the funds in the offset for the build.
  Borrowed funds work on the purpose test to get a deduction. An offset account maintains loan integrity. Loan redraws you would need to determine the purpose of each redraw

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  JimB on 13/08/2024 - 10:23

  I've always wondered what was the correct valuation method when going from PPOR to IP or IP to PPOR to calculate the cost base for CGT purposes.

  Some accountants will just proportion the days it was PPOR/Total ownership and some wants a valuation when it was changed from PPOR to IP (or vice versa).

  Can any real tax accountant confirm please.

  • 

    Duckie2hh on 13/08/2024 - 10:50

    -1

    Some accountants will just proportion the days it was PPOR/Total ownership and some wants a valuation when it was changed from PPOR to IP (or vice versa).

    do the valuation and then figure out which method gives you the best outcome.

    • 

      JimB on 13/08/2024 - 10:56

      So you have the option to choose?

      • 

        bemybubble on 13/08/2024 - 10:58

        I don't believe you get a choice (but I can't say for certain)

        Only reason why is the law is pretty clear and no where doesn't mention 'or' or 'choice'

        • 

          JimB on 13/08/2024 - 11:02

          @bemybubble: I appreciate the link, but it's not clear to me.

          What is your interpretation of the law? valuation (at time of change or retrospectively) or pro-rata?

          • 

            bemybubble on 13/08/2024 - 11:03

            +1

            @JimB: As in a valuation to be obtained.

            But like I said I can’t say for certain.

        • 

          Duckie2hh on 13/08/2024 - 11:12

          @bemybubble: ATO states that "you should" get a market valuation (ref below), which would work to allow you to more accurately calculate the amount of CGT during the period that the home was a IP. However, if you miss obtaining a market valuation, an acceptable method would be to proportionate the amount of years of IP vs PPOR.

          Ref: ATO

          • 

            bemybubble on 13/08/2024 - 11:30

            @Duckie2hh: My suggestion is if you're relying on that to take a screenshot. ATO website isn't, how would I say, always accurate… :P

• 

  greatlamp on 13/08/2024 - 12:01

  +1

  1. Which type of valuation would be valid if we decide to sell this property?
     You should call the ATO. From memory a real estate agents letter is sufficient for valuation unless there are particular circumstances (for example selling between related people).

  2. Should I pay off the loan or use the funds to build a house on the titled land and sell it?
     You can go to a volume builder and find out how much it costs to build a townhouse, then do your own sums. In general it is not worth it at the moment due to the high cost and shortage of labour, there is a reason builders are going bankrupt. However interest rates are expected to fall soon, if you start building now it will be finished in 2 years and you will be able to sell into the next housing boom - while there is still a shortage of properties on the market. If you can afford to build and hold the property you won't have much risk, prices don't decrease in a shortage. If you can only afford to build the property and need to sell it ASAP you are subject to market conditions.

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  ranakuldeep on 13/08/2024 - 12:17

  Thanks everyone for your knowledgeable response 👍