CGT on investment property owned less than 1 year

I

ippd

Registered User
Messages
24
Hi,
6 months ago I bought an new residental property house and I turned my initial residential property into an investment property ! I am now considering selling the investment property within the next 3 months and I've heard that if I sell the investment property within 1 year the property is not subject to capital gains tax ... is this correct in my situation or have I heard incorrectly ?

Thanks :)
 
You have heard incorrectly or been misinformed. 20% CGT will apply if the gain is an investment gain if you the transaction is one of a trade your marginal tax rate would apply . This is unlikely unless you buy and sell property frequently.
 
ARCH said:
You have heard incorrectly or been misinformed. 20% CGT will apply if the gain is an investment gain if you the transaction is one of a trade your marginal tax rate would apply . This is unlikely unless you buy and sell property frequently.
Click to expand...

Arch is incorrect and you heard correctly. If you sell your PPR within one year of changing its status from residential to investment property, then you are not liable for CGT on its sale
 
Correct - the 12 months after vacation of the PPR is CGT free even if the property is rented out.

Note also that if you rented the property out within 5 years of purchase as an owner occupier then you were/are liable for a clawback of stamp duty.
 
That's good to hear :)

Yea I paid the clawback on the stamp as I was a FTB and benefited from a reduced stamp duty rate but turned the property into an investment within the 5 years. The clawback fines are quite large,
You have 30 days to pay from the day tennants first move in.
10% fine if you pay it within 6 months of renting the property.
20% if you pay within 6-12 months.
30% if you leave it over 12 months.

That's not including an daily interest rate of 0.0273%

Not paying CGT for the 12 months after vacation of the PPR should get me that money back :)

Thanks !
 
ippd said:
The clawback fines are quite large,
You have 30 days to pay from the day tennants first move in.
10% fine if you pay it within 6 months of renting the property.
20% if you pay within 6-12 months.
30% if you leave it over 12 months.

That's not including an daily interest rate of 0.0273%
Click to expand...
That's interesting - I've never seen these figures mentioned before. Did you get hit with penalties and interest? If so did you file the return with the assistance of an accountant/tax advisor in order to maximise the chances of mitigating these charges?
 
I wasn't aware of them either until I rang up the stamp duty office and these were the figures I was told. I checked the revenue site and found this document ... there's alot in it but it does have a section on pages 22-23 which lists these penalities !

[broken link removed]
 
I'm actually in the process of paying this clawback and haven't actually exchanged any money yet ... I was including both the penalities and the interest, I haven't filed this return with an accountant, I just rang the stamp duty office myself. Do you suppose there would be a chance of mitigating these charges ?
 
I don't know but I do know that if I was faced with potentially high interest/penalties then I would certainly pay an accountant/tax advisor a few bob just in case they could recommend ways to reduce the bill!
 
ClubMan said:
I don't know but I do know that if I was faced with potentially high interest/penalties then I would certainly pay an accountant/tax advisor a few bob just in case they could recommend ways to reduce the bill!
Click to expand...

Completely agree. You might not even owe penalties!
 
You're right, I should look into it more before I fork over the money. Thanks for the advice :)
 
I've never heard of these figures before. 30 days to pay such a large amount of money is, IMO, punitive. I presume Rev. think the interest and penalties will act as a deterrent. I imagine it is having the opposite effect i.e. putting people off 'fessing up', who otherwise would have.
 
sorry IPPD when you mentioned investment property I wrongly assumed you were talking about selling the second property not your PPR.
 
Arch you did assume correctly, I am selling my second home and not my PPR. The second home was my PPR up until 6 months ago and is now my investment property and has been rented out for 6 months. As Art and Clubman pointed out "the 12 months after vacation of the PPR is CGT free even if the property is rented out". So I won't pay cgt if I sell within the next 6 months.
 
Just to clarify - see section 5 of the Revenue summary guide to CGT:
The exemption is also restricted where the taxpayer has not lived in the house for long periods.
However, a period of up to twelve months immediately before the end of the period of ownership is
treated as a period of occupation even though the owner may not have been actually living in it during
that period.
Click to expand...
 
I too will be in this situtation of renting my first home (and selling it within a year of moving out) and moving into a new property. As regards the Stam Duty claw back, does the 12 months window apply to it also?

I.e. if i have a First time property for 4 years, but a new one, rent the old one for say 11 months, sell it within 12 months of moving out (no CGT) am i still liable for stamp duty claw back? if so could i leave it idle until the 5 years is up and then rent it without any SD clawback?
 
DanE said:
I too will be in this situtation of renting my first home (and selling it within a year of moving out) and moving into a new property. As regards the Stam Duty claw back, does the 12 months window apply to it also?
Click to expand...

No.

DanE said:
if so could i leave it idle until the 5 years is up and then rent it without any SD clawback?
Click to expand...

Yes. Erm, actually not sure, but I don't see why not.

Have you also looked into your obligations with regards to registering with the PRTB?
 
You must log in or register to reply here.
Back
Top