Tax implications

blackenator · 26th Sep, 2014

So I am a first home buyer my property is currently being built at the moment. I am in NSW and got the fhog grant so the 15k and exemption of paying stamp duty. My question is I want to sell the property that I am building because I could make a substantial profit due to the rising prices in Sydney. What will be the capital gains tax I will have to pay? and I know I have to live in the property for 6 months before I sell as that was a requirement for the fhog does that start from construction or from when building started?

additional information : I purchased the block in June and construction will probably finish early next year.

Thanks

HD_ACE · 27th Sep, 2014

Well since you will have to live in it the 6 months will start when its completed and you move in.

If its your only ppor then it will be cgt free when you sell i would imagine.

Angel · 27th Sep, 2014

What would you do after you sell the house? Have you thought about drawing out some CG and using it as a deposit for an IP?

You will never gat another housed free of stamp duty, so you have received a financial benefit already.

blackenator · 27th Sep, 2014

HD_ACE said:
Well since you will have to live in it the 6 months will start when its completed and you move in.

If its your only ppor then it will be cgt free when you sell i would imagine.

I thought you have to live in it for 12 months or something to be cgt?

Angel said:
What would you do after you sell the house? Have you thought about drawing out some CG and using it as a deposit for an IP?

You will never gat another housed free of stamp duty, so you have received a financial benefit already.

I am hoping to do this but I the sydney market is so hot already not too sure if I can see any more growth

Terry_w · 27th Sep, 2014

blackenator said:
I thought you have to live in it for 12 months or something to be cgt?

You may be confusing holding an asset for 12 months to get the 50% discount on CGT.

Main residences are generally exempt.

blackenator · 27th Sep, 2014

Terry_w said:
You may be confusing holding an asset for 12 months to get the 50% discount on CGT.

Main residences are generally exempt.

Ah thank you for clearing that up for me terry

Jaggannath · 29th Sep, 2014

I don't think you should sell, unless you are having serviceability issues and will miss an absolute bargain. Perhaps talk to a broker

Paul@PFI · 2nd Oct, 2014

blackenator said:
So I am a first home buyer my property is currently being built at the moment. I am in NSW and got the fhog grant so the 15k and exemption of paying stamp duty. My question is I want to sell the property that I am building because I could make a substantial profit due to the rising prices in Sydney. What will be the capital gains tax I will have to pay? and I know I have to live in the property for 6 months before I sell as that was a requirement for the fhog does that start from construction or from when building started?

additional information : I purchased the block in June and construction will probably finish early next year.

Thanks

The FHOG will require you to reside in it for 6months (or the grant is repayable). Provided you do that you can sell and walk away with a profit and likely no CGT issues as it is covered by the MR exemption. However its a very shortsighted view....The costs of then buying back into the market means $30K of costs PLUS.....Bear that in mind. It may be far less costly to retain it even rented and not sell. Once you step off the property wagon its hard to get back on.

You might consider looking into the "cost"" of renting it out...Rents less cashflows out then add tax benefits of neg gearing. Your cost might be small like $40 a week to retain it. If it then appreciates in value over the next X years the $2k pa to keep it is trivial. In ten years time that $2k a year might represent a $200K capital gain.....A 10:1 return.

blackenator · 2nd Oct, 2014

Paul@PFI said:
The FHOG will require you to reside in it for 6months (or the grant is repayable). Provided you do that you can sell and walk away with a profit and likely no CGT issues as it is covered by the MR exemption. However its a very shortsighted view....The costs of then buying back into the market means $30K of costs PLUS.....Bear that in mind. It may be far less costly to retain it even rented and not sell. Once you step off the property wagon its hard to get back on.

You might consider looking into the "cost"" of renting it out...Rents less cashflows out then add tax benefits of neg gearing. Your cost might be small like $40 a week to retain it. If it then appreciates in value over the next X years the $2k pa to keep it is trivial. In ten years time that $2k a year might represent a $200K capital gain.....A 10:1 return.

Thanks for that makes a lot of sense. I have got quite lucky with this purchase and market in Sydney had moved quite a bit since I purchased the block I am leaning towards keeping the property and withdrawing the equity to purchase another hopefully

Paul@PFI · 2nd Oct, 2014

blackenator said:
Thanks for that makes a lot of sense. I have got quite lucky with this purchase and market in Sydney had moved quite a bit since I purchased the block I am leaning towards keeping the property and withdrawing the equity to purchase another hopefully

Much smarter. If you sell the farm you cant grow anything.

blackenator · 2nd Oct, 2014

Paul@PFI said:
Much smarter. If you sell the farm you cant grow anything.

Nice analogy will keep that in mind

Tax implications

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