Moving Into Your Rental Property


My wife and I have recently sold our PPR in Sydney and we want to move into our smaller investment property that we have owned and rented out for 8 years. Should I get a current valuation in order to calculate the CGT for when we sell the property in the future?

Thanks, Ross


There is no ability to reset the cost base when you move into a house that was previously a rental. The CGT calculation is simply calculate the whole capital gain then apportion between days covered by your main residence exemption to days not. You will probably qualify for the 6 months overlap rule (section 118-140 1997 ITAA) to count as days covered by your main residence exemption the 183 days before you sold your Sydney home, even if there were tenants in your rental at the time.

You need to make the most of section 110-25(4) ITAA which allows you to reduce your capital gain by holding costs that are not otherwise claimed as a tax deduction. Because the formula calculates the whole gain, before apportionment, the costs while you are living there can reduce, proportionally, the capital gain for the time you were not. This section includes but is not limited to; insurance, rates, interest, repairs, cleaning materials, lawn mower fuel etc…… Just a matter of good record keeping.

Of course if you never sell you never pay CGT and if it is your home when you die your heirs (other than your joint tenant if applicable) will inherit it at market value at DOD under section 128-15 ITAA 1997 so the problem goes away. I suggest you put this email in with your other estate records.

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Fun fact – If you have a low value pool for the property P&E you are entitled to continue to write down the balance because the asset has not been sold.

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