Ppty valuation for CGT purposes ...

[bennido]

Hi,

I am considering converting my PPOR to an IP.

How do I value the property before I convert it from a PPOR to an IP (for determining the cost base to calculate future capital gain) ?

Will a valuation from a RE agent suffice ?
Or does the ATO have a list of approved valuers that I must use ?

Thanks !

 

[Perp]

Real estate agents appraise properties; they're not qualified to value a property. You'll need to pay to have your property valued, by - surprise - a valuer. Look in the Yellow Pages under "Valuers - Real Estate". It should cost you a few hundred dollars.

 

[bennido]

Thanks for the reply.

Do I need to ensure that the valuer has some approproate industry certification. Is there some sort of license thing like a tax-office approved certified valuer ?

 

[LynnH]

bennido

As Tracey said, look up the Yellow Pages and ring around some of the firms (which only employ qualified people for such work). You will need to let them know the purpose of the valuation (in this case, for CGT purposes). Registered Valuers or Licensed Valuers are considered by the ATO to be suitably qualified for the purpose of such valuations.

Cheers
LynnH

 

[bennido]

Will do. Thanks Lynn and Tracey !

 

[redsquash]

Find an alcoholic valuer which will give you the most optimistic value and meet him in a bar . Buy him drinks.
let me know if it works and if he has a brother in Brisbane a sI will need to do the same!
Valuers tend to be very conservative so let them know the purpose of the Valuation.

 

[coastymike]

http://www.nsw.api.org.au/c/apinsw allows you to find a professional valuer in a location.

 

[redsquash]

Is there a similar web site for Brisbane?

 

[coastymike]

http://www.api.org.au/index2.aspx?division=3

 

[MoreIPs]

You can approach it in 2 ways:

1. Get a valuation;
2. Rely on time as an IP / PPoR

For 2., if you hold the property for say 10 years, and it is a PPoR for 8 and a IP for 2 (not considering any exemptions for the moment), then the CG will be (Sale Price) subtract (Purchase Price + Cost Base) multiplyed by (2/8) then 50% reduction.

Handy if the property experiences massive growth while an IP but less growth as an PPoR.

For instance:

Buy 2005: $200,000 (including cost base)
Sell 2015: $400,000

Capital Gain is $200,000 and taxable if IP for whole time. BUT

if IP for only the last 2 years, CG is $50,000 (using 2 above)

But if you use 1. above and the property is IP from 2013 to 2015 and you have it valued in 2013 and that valuation comes in at $300,000 then the capital gain that is taxable is $100,000.

So getting a valuation can be dangerous unless you expect a flat market for a long time or plan to hold for a short term only. I tend to not get valuations as my strategy is to hold for 2 property cycles minimum.

Regards

 

[bennido]

You can approach it in 2 ways:

1. Get a valuation;
2. Rely on time as an IP / PPoR

For 2., if you hold the property for say 10 years, and it is a PPoR for 8 and a IP for 2 (not considering any exemptions for the moment), then the CG will be (Sale Price) subtract (Purchase Price + Cost Base) multiplyed by (2/8) then 50% reduction.

Handy if the property experiences massive growth while an IP but less growth as an PPoR.

For instance:

Buy 2005: $200,000 (including cost base)
Sell 2015: $400,000

Capital Gain is $200,000 and taxable if IP for whole time. BUT

if IP for only the last 2 years, CG is $50,000 (using 2 above)

But if you use 1. above and the property is IP from 2013 to 2015 and you have it valued in 2013 and that valuation comes in at $300,000 then the capital gain that is taxable is $100,000.

So getting a valuation can be dangerous unless you expect a flat market for a long time or plan to hold for a short term only. I tend to not get valuations as my strategy is to hold for 2 property cycles minimum.

Regards

Wow ... what a great post ! Thanks for the reply !

I am tempted to get a valuation done by a licensed valuer anyway. This way, when I sell the ppty later, I can choose to go either (1) or (2) depending on which is most advantageous !