After six years, a house can be liable for CGT
MY wife and I are in our early 40s. She owns a property with approximately $130,000 in equity. It used to be her home, but since moving overseas it has been rented for the last two years. There is a shortfall of about $4000 between rental income and expenses, and we have no other Australian income. I have read on the ATO site that if we sell it before it has been six years since it was her primary residence, then there will be no Capital Gains Tax (CGT) applicable. If that is true, my thoughts are that we would be best to release the equity in the property and transfer it into super. And if we did need to move back to Australia we would rent. Do you think this is a reasonable plan?
Provided the property was her residence before it was rented out two years ago she could certainly claim capital gains tax exemption under the six year rule.
The proceeds could then be contributed to superannuation, subject to the limits.
You are the only person who can decide whether the potential capital gain from the property would be greater than if the property was sold and the money was placed into superannuation. Just understand that any potential capital gain against the property will be based on the entire value, but if you contribute $130,000 to super that will be the total amount of capital working for you. I AM 50 years old and married. I have two investment properties with a combined value of around $1.7m and related investment mortgages totalling $960,000. In addition I have a $180,000 blue chip share portfolio invested in my wife’s name. Our home is valued at around $500,000, and has a mortgage of $130,000. Is there a way of transferring the debt from the family home to either the investment property or against the share portfolio, so the interest can be deductible?
The only way out is to sell investment assets and use the proceeds to eliminate the housing loan.
Then you can borrow back against that house to buy other investment assets.
As the purpose of the second loan is for investment the whole of the interest on that loan would be tax deductible. Before you take any action you could check out what transaction costs and capital gains tax are involved. It is possible the costs may outweigh the benefits. I AM 20 and have $10,000 in cash I would like to invest long term. Would you recommend the share market or do you have another suggestion?
I think the share market is fine if you can take a long-term view, and don’t panic and cash out when the market is having one of its normal down periods.
The big decision is whether you invest in shares directly, or use managed funds where the decisions are made by full-time professional fund managers. Only you can decide which will work best for you. Noel Whittaker is the author of
and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au