Moving up the property ladder via renovating and selling: But do I need to pay capital gains tax?

Moving up the property ladder via renovating and selling: But do I need to pay capital gains tax?
Moving up the property ladder via renovating and selling: But do I need to pay capital gains tax?

Hi Margaret,

Just a query on capital gains tax (CGT).

Our principle place of residence is currently on the market to sell, and once it does we would like to buy another property.

However the kind of property we would like to buy next as a primary residence is at this point out of our price range.

What we would like to do is climb the property ladder by doing a quick reno then selling.

Is there a required time frame for us to live in this property to be exempt from CGT?

Regards,

Grace

Margaret's answer on the next page. Please click below.

 


Hi Grace,

As long as you live in a property and do not claim another property as your principal place of residence (PPOR) during that time, then there is no set period of time in which you must live in a property in  order to avoid capital gains tax (CGT). 

The CGT exemption applies to any residential property in which we live and claim the principal place of residence upon. The requirements to claim this exemption are that you live in the property and it is your primary place of residence, and that you have no other primary place of residence.

If you kept buying properties, lived in them and did a renovation, and then sold them quickly, doing it again and again in short periods of time, you may place yourself in the situation where the tax office would consider that you are in fact in the business of property renovation and may disallow the exemption. Under such circumstances it is more likely that they would also see the gains you made as income and tax you accordingly, rather than apply capital gains tax.

If you are genuinely moving in in order to climb the property ladder for your personal circumstances only, rather than looking to make more and more profit from renovations and using the PPOR exemption rule simply to avoid tax, then it won't matter how long you live there, the exemption should apply.

Kind regards, 

Margaret

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Margaret Lomas

Margaret Lomas

Margaret Lomas is a best-selling author and writes and hosts the popular Property Success With Margaret Lomas and Your Money, Your Call, both on Sky News. She is the founder of Destiny.

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