Help do I have to pay capital gains tax on this property?

Question

We purchased a home with a view to living in it although we were renting interstate at the time. We moved into the house for about 2 weeks when we first bought it to do a few things (and to try and avoid CGT) we didnt get the power on etc as we were only going to be there a short time. We rented it out for a year and then moved in for a year and rising interest rates saw us having to sell it.

What I want to know is will the ATO consider those 2 weeks as having lived in the property or not? We cant really prove it as we had no utlities other than water connected at the time.

Thanks

Answer 1

Well, 2 weeks isn't very long to live somewhere, regardless of intention, and you might want to look at this ruling from the ATO:

http://law.ato.gov.au/atolaw/view.htm?do...

Answer 2

As they say, it's a question of fact and degree.  My personal view is that 2 weeks is not sufficient, but hey, I have heard of a dodgy tax accountant telling their clients it's ok if they didn't even move in as long as they say they had the intention to move in!

I think the right answer is that you should only get the exemption for 1 of the 2 years (you should pro-rate the gain by the number of days you actually lived there by the total days you held the property).

Having said that, some people may tell you that it is ok to claim the exemption for the whole lot. I think this is not the right answer and if the ATO ever caught you, I have a feeling they would win.  You could be hit for penalties on top of paying interest (at ridiculously high interest rates) for the underpaid tax.  Do you want to take that risk? It's up to you...

Answer 3

see an good CPA.  they will need to take everything into consideration to help you get the best result.

from what you have told me you may be up for CGT,  it depends on your income, expenses on the property and the purchase & sale prices.