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Suzie D.
Suzie D.
Stony Chute, NSW
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Q:

I have a house in a good capital gains area and have moved into my partners house 6 months ago. He died and gifted me the house and 100 acre property. I have other income from smsf ( just turned 60), and another blue chip property shared with business partner. ( the rental provides a reasonable living for us both). My question is about the tax of the gift property in low capital gain area ( but where I choose to live) , and if I would best to rent the former dwelling, or sell it.?

2 weeks ago

Responses

Hi Suzie,

Sorry to hear of the passing your partner.

Inheriting the property doesn't cause any tax - that transfer is tax free. Tax can become an issue if you later decide to sell the property. Given he lived in the property & of you continue to live in there as your primary residence you will be able to sell tax free in the future if you wish.

Selling or renting your former house will depend on your overall financial situation as to the best outcome there.

I suggest you talk to an accountant who can help you with your primary residence and tax exemption. You may be able to sell your former residence tax free (or with minimal tax) now. Talk to an accountant who can help you through it.

Regards
James

Hi Suzie,
My condolences to you. I wish you the very best for your future. You have said that you don't need the income from your former dwelling, I would get a sworn valuation done now as the capital gains tax base and keep it as long as you can. You would then only pay tax on the gain from your partners death until the time you sold and if that was more than a year, 50% of the gain.
I hope that helps?
Regards
Scotf

last week

Thank you - do you know if improvements made to make a property compliant for rental standard ( deck safety regulations ) can be deducted from first years rental for tax saving - otherwise I am told I will have to pay 40% - the accountant I go to said I cannot claim and should sell - but this does not seem right -seeing as new laws have made compliance essential and the Reno will cost around 25,000 -

last week

I do need the income either rental or sale, but to rent will cost several thousand in compliance to new safety standards, but it is high capital gains area and will be a good investment if I can deduct from profit of rental to make the improvements- and lower tax thereby ?

Comments

Hi Suzie,
I think that the accountant is correct. If you need to make capital improvements to the property, they are added to the cost base and are not a rental expense. By all means get a second opinion and make sure you make the decision with all of the information available to you.
Good luck
Scott

Hi Suzie,

Wow a few issues here and some life decisions. I'll see if I can assist.

1. OK before you and your partner got together you had your house and he had his property? The first thing to consider is the main residence exemption for capital gains tax. Where two people meet and then get together and move into a house one of the parties must make a main residence election. The main residence exemption applies to the house you live it. You are not required to pay CGT on your main residnce.

So you have a choice to pick one of the properties as the main residence for both. You may also choose to apply the main residence to different properties but then you would only get 50% as an exemption when you sell it.

It applies from the time you moved in together - So this is an issue

2. Gift Tax - There is no such thing as gift tax in Australia. We had death taxes a few years ago but they are gone. OK if the property was considered the primary residence for your partner and it has been willed to you then you have a window of 2 years to sell that property and then it is exemt from CGT.

3. Renting or selling - You need to run the numbers, land tax, etc..... Also the farm was it pre 1985? CGT does apply on a property but not the 5 acres around the house. If it is a pre 1985 asset then you are fine but if not then there may be some CGT if you sell the farm even though it was the primary residence.

4. Deductions - There is an age old thing about improvement or repair. If you improve you generally deduct over the life of the asset. If you repair then you can usually get a deduction. see this awesome guide from the ATO https://www.ato.gov.au/uploadedFiles/Content/IND/downloads/Rental-properties-2017.pdf


You really need to get in front of an accountant and spend some money. There are many many issues here.

Thanks

AJ

Comments

Many thanks - yes I did go to an accountant- and have more questions since then. So will probably need to go again. - I do go regularly but generally with a business partner, and sometimes am concerned the advice Favours him and is less helpful for me.

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