Found an interesting article on Granny Flats and CGT for those who are building a granny flat at their PPR.
http://www.bantacs.com.au/QandA/index.php?xq=435
http://www.bantacs.com.au/QandA/index.php?xq=435
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"If the Granny flat is used as a rental right from the start not only
will you lose the main residence exemption retrospectively [B]on the land
under the Granny flat[/B] but you cannot use section 118-192 to reset the cost
base because they are two separate dwellings. "
In our case we've had the house 20 years. If I sold next month I would lose the PPOR exemption on that part occupied by the GF for the last 20 years, even though the GF has only been available for occupation from January 1 next year. That could be a substantial amount which Mr ATO would get, so I wouldn't like to lose it. It may be as simple as getting our daughters to live there for a brief time.That is simply, you can't claim the 'main residence exemption' on the proportion of the Granny flat. That makes sense doesn't it?
In our case we've had the house 20 years. If I sold next month I would lose the PPOR exemption on that part occupied by the GF for the last 20 years, even though the GF has only been available for occupation from January 1 next year. That could be a substantial amount which Mr ATO would get, so I wouldn't like to lose it. It may be as simple as getting our daughters to live there for a brief time.
Common sense should dictate, that even if it's been there for 20 years, the fact that it wasn't available for rent should mean that you DONT lose the PPOR exemption.
If you are not even getting rent for the property the last thing you want is to be up for Capital Gains Tax (CGT) on your home as a result of
building the Granny flat. It is even worse than this because the land used by the Granny flat will be subject to CGT right back to the day you purchased it. This is another reason you want to keep your main residence exemption over the whole property, so that if you even do receive rent on the Granny, assuming up until that point in time the whole property has always been covered by your main residence exemption, you can reset the cost base of the whole property to the market value at the date the Granny flat is rented. This will lock in all capital gains to date. No chance of CGT applying to the land before the Granny flat was built. To achieve this you need to use the Granny flat as part of your home as per the Mr and Mrs Brown example above for at least 3 months after it is built.
Code:"If the Granny flat is used as a rental right from the start not only will you lose the main residence exemption retrospectively [B]on the land under the Granny flat[/B] but you cannot use section 118-192 to reset the cost base because they are two separate dwellings. "
That is simply, you can't claim the 'main residence exemption' on the proportion of the Granny flat. That makes sense doesn't it?
I have a complicated scenario.
We bought a PPOR in 2006.
Moved out in 2009 another place which is not a PPOR.
Built a GF in 2011.
What if we occupy both (main house & gf) just before the 6th year end?
It is going to be interesting to calculate the CGT in the future!
Main residence exemption won't be applicable to only the GF portion right?You would never have lived in the GF before renting it so the main residence exemption wouldn't apply to this. It may after you move in.
We're not talking common sense, we're talking tax law.
From the article quoted
Main residence exemption won't be applicable to only the GF portion right?