# Can I sell now and what tax do I have to pay



## Confused?? (18 Sep 2006)

Hi,  I am due to buy a property but like many new developments I keep on getting told that it will be ready in two months, then another two months, then another four months and now I'm being told that it's not ready until next Jan 07.  
I had hoped to be living in it by now but my plans have changed and I think I wish to sell the property.

Can someone please tell me do I have to wait until the property is finished inorder to do this?  I was buying it as an owner occupier but now I think i will just sell it, as it was meant to be available last year!  So do I have to pay stamp duty and what is the % of the capitals gains tax that i will have to pay.. I am buying the property for 305K and I think it will sell for around 405K

Thank you for your time.
Confused??


----------



## Lia (18 Sep 2006)

This is called property flipping. Where is the development?


----------



## Confused?? (18 Sep 2006)

what does property flipping mean?  I do not think I will buy another property in this country as I may be emigrating due to the fact that I have been left hanging on for so long and now have itchy feet...


----------



## CCOVICH (18 Sep 2006)

The ins and outs of 'flipping' have been discussed several times before (including tax), here is one example.


----------



## liteweight (18 Sep 2006)

Presumably you haven't paid for the property yet so you can't sell on something you don't yet own. Flipper is someone who does this but there is a special clause in the contract, agreed by the developer which allows them to do this. Most developers no longer allow it and in any event, it's too late in your case. If you are a FTB then the best case scenario is to complete the sale, live in the property for a while as your PPR and then sell on. In this way, there is no stamp duty and no capital gains tax.

What you are suggesting would mean you buy as an investor, would have to pay stamp duty, and 20% capital gains on resale.

Patience has it's rewards!!


----------



## mf1 (18 Sep 2006)

Or if you don't want any aggravation, ask the builder if you can be released from the contract without penalty. I'm sure the builder would be happy to take the profit. 

mf


----------



## budapest (18 Sep 2006)

Could you not just take possession of the property as an owner occupier and then sell early next year and save yourself the headaches?  There may also be changes in the upcoming budget, which would make flipping more difficult.


----------



## Confused?? (18 Sep 2006)

Hi, thanks all for you replies and advice.  My only concern is that i am told that it won't be available until May 07.  I can't wait any longer for something that i was told i would be in nearly a year ago.  I am a first time buyer and this is all new to me. Thanks


----------



## Confused?? (18 Sep 2006)

liteweight said:


> Presumably you haven't paid for the property yet so you can't sell on something you don't yet own. Flipper is someone who does this but there is a special clause in the contract, agreed by the developer which allows them to do this. Most developers no longer allow it and in any event, it's too late in your case. If you are a FTB then the best case scenario is to complete the sale, live in the property for a while as your PPR and then sell on. In this way, there is no stamp duty and no capital gains tax.
> 
> What you are suggesting would mean you buy as an investor, would have to pay stamp duty, and 20% capital gains on resale.
> 
> Patience has it's rewards!!


 

By the way Liteweight, what does PPR mean?  If I am to live in it and sell it within 5 years I still have to pay capital gains, if I rent it i have to pay stamp duty? So does it matter if I wait until I have it or sell before?


----------



## CCOVICH (18 Sep 2006)

PPR=Principle Private Residence.

If you live in the house (use it as your PPR) you are exempt from Capital Gains Tax.  If you rent it out within 5 years, you are liable for stamp duty.


----------



## corco2000 (18 Sep 2006)

CCOVICH, is he still liable for SD before the 5years if its a new build and under 125sq meters?


----------



## Satanta (18 Sep 2006)

corco2000 said:


> CCOVICH, is he still liable for SD before the 5years if its a new build and under 125sq meters?





CCOVICH said:


> If you rent it out within 5 years, you are liable for stamp duty.



Yes. 
If you rent out a property which was SD exempt (at the time of purchase) within five years of the purchase, a SD clawback is due. 

It being a new build and under 125sqm made it exempt, but once rented the clawback kicks in and SD is due on the property.


----------



## Lia (18 Sep 2006)

Confused?? said:


> Hi, thanks all for you replies and advice. My only concern is that i am told that it won't be available until May 07. I can't wait any longer for something that i was told i would be in nearly a year ago. I am a first time buyer and this is all new to me. Thanks



You originally said Jan 07 - where is the development?


----------



## liteweight (18 Sep 2006)

Confused?? said:


> By the way Liteweight, what does PPR mean?  If I am to live in it and sell it within 5 years I still have to pay capital gains, if I rent it i have to pay stamp duty? So does it matter if I wait until I have it or sell before?



CCOVICH is right. If you live in it as your principal private residence for any length of time you can sell it on without incurring any tax liability. If you rent you will face stamp duty clawback and CGT on sale.

Perhaps you should ask the developer if you can withdraw. It's a lot of money to lose out on though!!


----------



## Confused?? (19 Sep 2006)

liteweight said:


> CCOVICH is right. *If you live in it as your principal private residence for any length of time you can sell it on without incurring any tax liability.* If you rent you will face stamp duty clawback and CGT on sale.
> 
> Perhaps you should ask the developer if you can withdraw. It's a lot of money to lose out on though!!


 

Hi liteweight, sorry for appearing so dim!  So if I live in it for a month and sell it on, I do not have to pay any tax?  I'm sure I'd have to pay capital gains tax or is there another tax relating to the equity?


----------



## liteweight (19 Sep 2006)

Not dim at all to ask questions until you reach understanding.  Dim would be to go for it without checking the possibilites!!

Maybe someone else can give you the time frame. From my point of view a month or so is enough. No tax liability occurs if you SELL. You would lose FTB status however, except with regard to mortgage interest relief for 7 years i.e. if you sell ,and buy again within the next 7 years you are entitled to greater tax relief. If you buy again in 3 yrs. for example you have 4 yrs. left at FTB tax relief on mortgage.


----------



## Confused?? (19 Sep 2006)

Ok so, I think I will wait, live in it and then sell.  thanks very much for all your help.
Not so confused now!!


----------



## Satanta (19 Sep 2006)

Confused?? said:


> So if I live in it for a month and sell it on, I do not have to pay any tax?  I'm sure I'd have to pay capital gains tax or is there another tax relating to the equity?


No CGT or SD (or any other tax) payable for the sale of a PPR. 

Might be worth having some paperwork to justify why you sold in such a short time (could be considered tax evasion if Revenue felt you did it simply to avoid the tax). 
Have a few bills in your name to prove you were resident, some with phone records to prove your occupancy would be even better.


----------



## mf1 (19 Sep 2006)

I suspect Revenue would regard it as highly suspicious that a FTB would buy, avail of stamp duty relief, live there for  "not very long" and then sell making a whopping profit ( if it did sell at all, mind you, given other threads running) on which no CGT would be payable. More likely that they would regard it either as evasion or the profit as income to be taxed, perhaps? 

mf


----------



## liteweight (19 Sep 2006)

The OP is thinking of emigrating. I think Revenue only regards profit on property as income if one makes a habit of selling on one's PPR. It would be impossible for them to police otherwise....people's circumstances do change over a period of time. The OP has waited a long time for property to be complete and life has a habit of catching up with you. Now s/he feels s/he'd do better abroad.  I don't think there'd be any problem but I would collect the bills in my name, just to be on the safe side.


----------



## Satanta (19 Sep 2006)

liteweight said:


> The OP is thinking of emigrating...... I don't think there'd be any problem but I would collect the bills in my name, just to be on the safe side.


If you can have any paperwork relating to organising the trip/work abroad (even little things such as when you hand in your notice at work [if you do decide to move]). Showing that many/all of these things happened well after you placed your deposit on the house should show you had full intentions of living there as your PPR when you bought, you did use it as your PPR for a short time and then later your situation changed and you decided to sell.

Seems like a genuine case even if the timeline gets slightly distorted to ensure you don't move until you've identified your tax liability.


----------

