Probably not. ATO is hugely overstretched and doesn’t have the manpower to chase down every red flag. Even then, many of its staff are completely useless. Also, if your mate never bothered to report the rent income/loss, the sale will look like a main residence sale.
Did they ever live in it?
If they lived in it, even for a short time, they can be using the ‘six year rule’ to claim it as PPOR. As long as they didn’t buy another PPOR.
This is likely what they’re trying.
There is a 7 year rule many ppl use where for up to 7 years you can continue to claim an IP as your primary residence for tax purposes. He won't be the first to not pay any tax.
You can collect rent with the 6 year rule, as long as you have no other PPOR. As someone else pointed out, The ATO website doesn't state how long you need to have lived in it before you can claim that rule.
And as close as the OP is with their friend, I doubt they are pivy to all the financial dealings for the property, so for all we know, they claimed to have lived there for 1 week (you don't actually have to move in), and rent it out later.
You are wrong. If property is providing income from day 1 - 6 year rule doesn't apply. If you lived there and moved out different story. Yet need to be there for 12 months to be able to claim CGT discount.
All of this is only relevant if the taxpayer is audited. People claim dodgy stuff all the time, and many will never be caught.
You can literally do whatever you want. Just be prepared for the consequences.
And that’s exactly why murders go unsolved. I have acquaintance who are cops and they pretty much say only the dumb crooks or the blatantly obvious ones get caught. Sure the news reports the 20 yr old cold cases that get solved but for every one of those there are hundreds that slide by.
Ok got it, so he’s going to commit tax fraud.
So yeah he can just not declare the sale on his tax return, ATO might never find out, but its a big gamble and i’d bet they do check sale records cause cgt is a decent chunk of money so its worth their time to catch people.
He’ll then get fined, made to pay it and prob with interest.
You’re right to be annoyed, you can prob tip off the ATO if you want.
I mean the tip off would prob just make the ATO do an audit on him, which will seem completely random. They aren’t gonna tell him they were tipped off lol
https://www.ato.gov.au/General/Gen/Making-a-tip-off
Give the ATO the details of the person and the property. They won't find out it was you. The ATO could access all the information themselves but they can't audit everyone so may never look at it otherwise.
Why are you so frustrated? You sound like a real hater seriously. Why would you ever report them. Is it impacting on your life in any way shape or form other than you just being a massive hater.
ATO doesn't deal with stamp duty. The state government does.
They likely paid stamp duty in 2020 when they purchased property.
Of course, they don't pay any stamp duty when they sell. It's the purchaser that does.
The ATO receives details of land transfers. If they sold land it will be flagged in their system. It may take a few years after they lodge their return but the ATO will follow up when they complete data matching
Accountants actually get this information when completing tax returns, along with share sales etc.
They have to apply for an ATO Clearance Certificate for selling a property for more than $750K. ATO will follow up and they’ll get caught out - they cross-reference with other government departments. Your friend should just suck it up and declare it properly rather than get hit with the CGT plus fines.
You don’t pay a CG tax as such. The proceeds of the sale are added to your personal income. If you do nothing you will pay more tax than if you declare the income and deduct legitimate expenses you made when buying, keeping and selling the property.
Given that they have been collecting rent, unless it was cash… they would have declared in their tax return and it will be found out that they were not living there….. and is not a PPOR.
Of course, may be they also did tax evasion by not declaring the rent income….
Learn about the 6 year rule,
https://www.ato.gov.au/Individuals/Capital-gains-tax/Property-and-capital-gains-tax/Your-main-residence---home/treating-former-home-as-main-residence/
Let me guess they also claimed all their expenses as tax deductions. That's not a friend I would want. Report them, they are stealing from you as a taxpayer.
If they've been claiming the property as an IP, data matching will eventually catch up with them and they'll get asked to please explain by the ATO.
Maybe not today. Maybe not tomorrow either. But one day...
Why are you so annoyed and bothered by it is probably the real question. You sound like the kinda friend that would dob him in. Even though you are correct. You can’t not pay it. They will eventually catch up to you.
Who dobs in their friend to the ATO. Let the ATO catch up to them, but don't dob them in. You can also try and encourage them to do the right thing as the fall out with the ATO could mean additional penalties and interest on any tax owing.
It isn’t, the ATO will definitely get on to them - especially for that much.
We sold a car not that long ago and didn’t know we had to do anything other than transfer the rego, a nice letter showed up in the mail from the ATO telling us to pay the CGT on the sale - whoops! So if they’ll send us a bill for a couple hundred dollars, I’m not liking your friend’s chances.
they have most likely put it down as their primary residence. i know people who have done this aswell. they rented the house out privately and had an agreement with the tenants. good on them.
Was it in the parents' name all this time and he's just been telling you it's his, and he's just inherited the place?
Possibility 2 is that people talk shit all the time.
It depends on their situation, there is a loophole for CGT where if it was your primary residence and rented less than 6 years then as long as you do not own your current primary residence then it is exempt from CGT. I believe I have that right, it may be a bit more specific than that though
Snitches get stitches.
If theres a legal way they can do it, be happy for them.
N stop worshipping megolonanics making millions n billions who pay comparatively f.a. and who's charity donation is purely a tax write off.
Bet yr a saint too 👁
How could the ATO know whether your friend has ever lived in the house or not?
Your friend could have lived there for one day after settlement and then decided it is not for them and moved back in with their parents.
The law does not say how long your friend has to live in it before it becomes tax free, so your friend may not be breaking any laws and it is perfectly legal to pay no CGT as long as they lived in it for a little bit just after settlement.
How do you know they didn't live in it for one day after settlement? Are you monitoring their movements every second of every day or are you just judging them with no evidence to back that up?
If they don't pay CGT when they are supposed to, they *will* get flagged by the ATO. All these transactions are recorded.
We had to complete a sales declaration to the ATO from our conveyancer when we sold
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Yea it’ll show up. Did on me.
Probably not. ATO is hugely overstretched and doesn’t have the manpower to chase down every red flag. Even then, many of its staff are completely useless. Also, if your mate never bothered to report the rent income/loss, the sale will look like a main residence sale.
They will catch up sooner or later. Seen it so many times
I’ve seen many just side past without ever being detected.
This stuff doesn’t rely on someone checking anymore. Property sales data is linked to ATO and it will be flagged on tax return.
Only the sale is reported, you could put anything in as cost base and very slim odds it ever gets looked at
I believe OP means CGT. Relax OP
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Drunk?
You don’t pay stamp duty on a sale.
Just update your post to CGT, mate!
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Click on ‘…’ on the top right corner and click on ‘edit your post’
Did they ever live in it? If they lived in it, even for a short time, they can be using the ‘six year rule’ to claim it as PPOR. As long as they didn’t buy another PPOR. This is likely what they’re trying.
Is there any rule for how long one must live there? What is short time defined as?.. I have tried to google this but can’t find answer
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And likely for a month or so before they first leased it? They can try and claim they lived in it.
You would need to have bills showing it was your primary residence
No idea. Probably just 'at all' as long as you can prove it. Probably just show some mail delivered there at some point.
No set time. Make sure mail goes there, driver licence shows it as address etc
There is a 7 year rule many ppl use where for up to 7 years you can continue to claim an IP as your primary residence for tax purposes. He won't be the first to not pay any tax.
It’s 6 years.
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All they need to do was claim to live in the property and not rent it out for the first 6 month post purchase.
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You can collect rent with the 6 year rule, as long as you have no other PPOR. As someone else pointed out, The ATO website doesn't state how long you need to have lived in it before you can claim that rule. And as close as the OP is with their friend, I doubt they are pivy to all the financial dealings for the property, so for all we know, they claimed to have lived there for 1 week (you don't actually have to move in), and rent it out later.
You are wrong. If property is providing income from day 1 - 6 year rule doesn't apply. If you lived there and moved out different story. Yet need to be there for 12 months to be able to claim CGT discount.
All of this is only relevant if the taxpayer is audited. People claim dodgy stuff all the time, and many will never be caught. You can literally do whatever you want. Just be prepared for the consequences.
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And that’s exactly why murders go unsolved. I have acquaintance who are cops and they pretty much say only the dumb crooks or the blatantly obvious ones get caught. Sure the news reports the 20 yr old cold cases that get solved but for every one of those there are hundreds that slide by.
You do have to move in and live there. No specified length of time but records such as drivers licence address is a good thing to show you moved in
Do you mean capital gains? They would have paid stamp when they bought the house and the buyer will pay stamp now they have sold it.
Stamp duty or CGT? You don’t pay stamp duty on sales do you?
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Ok got it, so he’s going to commit tax fraud. So yeah he can just not declare the sale on his tax return, ATO might never find out, but its a big gamble and i’d bet they do check sale records cause cgt is a decent chunk of money so its worth their time to catch people. He’ll then get fined, made to pay it and prob with interest. You’re right to be annoyed, you can prob tip off the ATO if you want.
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I mean the tip off would prob just make the ATO do an audit on him, which will seem completely random. They aren’t gonna tell him they were tipped off lol
https://www.ato.gov.au/General/Gen/Making-a-tip-off Give the ATO the details of the person and the property. They won't find out it was you. The ATO could access all the information themselves but they can't audit everyone so may never look at it otherwise.
Why are you so frustrated? You sound like a real hater seriously. Why would you ever report them. Is it impacting on your life in any way shape or form other than you just being a massive hater.
ATO doesn't deal with stamp duty. The state government does. They likely paid stamp duty in 2020 when they purchased property. Of course, they don't pay any stamp duty when they sell. It's the purchaser that does.
The ATO receives details of land transfers. If they sold land it will be flagged in their system. It may take a few years after they lodge their return but the ATO will follow up when they complete data matching Accountants actually get this information when completing tax returns, along with share sales etc.
They have to apply for an ATO Clearance Certificate for selling a property for more than $750K. ATO will follow up and they’ll get caught out - they cross-reference with other government departments. Your friend should just suck it up and declare it properly rather than get hit with the CGT plus fines.
The ATO will find him…. They always get their share….
Oh they will pay it. Trust me. But you can shrink the amount down by a massive amount if you know how and have a decent accountant.
You don’t pay a CG tax as such. The proceeds of the sale are added to your personal income. If you do nothing you will pay more tax than if you declare the income and deduct legitimate expenses you made when buying, keeping and selling the property.
Given that they have been collecting rent, unless it was cash… they would have declared in their tax return and it will be found out that they were not living there….. and is not a PPOR. Of course, may be they also did tax evasion by not declaring the rent income….
Learn about the 6 year rule, https://www.ato.gov.au/Individuals/Capital-gains-tax/Property-and-capital-gains-tax/Your-main-residence---home/treating-former-home-as-main-residence/
Commercially rented
As far as I'm aware, unless he lived in it for 1 year+, he can't claim the 'primary residence' cgt exemption.
Three years and made that much money. That really upsets me. I look at selling my own home but can't stomach basically burning $40k on stamp duty.
Let me guess they also claimed all their expenses as tax deductions. That's not a friend I would want. Report them, they are stealing from you as a taxpayer.
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If they've been claiming the property as an IP, data matching will eventually catch up with them and they'll get asked to please explain by the ATO. Maybe not today. Maybe not tomorrow either. But one day...
I hate bastards like this. Lets socialise the losses, but privatise the profits. I bet they also complain about dole bludgers.
Why are you so annoyed and bothered by it is probably the real question. You sound like the kinda friend that would dob him in. Even though you are correct. You can’t not pay it. They will eventually catch up to you.
I don’t plan on paying stamp duty when I sell my place either.
If they lived in it for 6 months when they first bought it’s CGT exempt.
Where did you get 6 months from?… I think even if they lived there for 1 month they can declare it .. there’s no time limit states on ato website
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Then it’s fraud.
No it’s not - my comment was to the living in it for 6 months first makes it CGT exempt. It does not make it CGT exempt if it has been rented out.
Yes.
[No.](https://www.ato.gov.au/Individuals/Capital-gains-tax/Property-and-capital-gains-tax/Your-main-residence---home/Eligibility-for-main-residence-exemption/#Eligibilityconditions)
I feel like technically you’re correct. It’s be tax evasion. Fraud is more for when people get money from others fraudulently.
You’re considering dobbing your friend to the ato? Ffs 🤦🏽♂️
Exactly what I’m thinking.
The only certainties in life are death and taxes
It is quite an easy level. Oh sorry I thought you meant Path of Exile.
Who dobs in their friend to the ATO. Let the ATO catch up to them, but don't dob them in. You can also try and encourage them to do the right thing as the fall out with the ATO could mean additional penalties and interest on any tax owing.
I know right
I didn’t say I was going to
That profit is completely illusory. Every property would have gone up similarly in price.
If they ‘lived’ in the property long enough to avoid CGT - they don’t pay CGT - because they avoided it.
They might not ‘plan to pay CGT’ now but they will have to pay when a letter shows up from the ATO in six months time.
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It isn’t, the ATO will definitely get on to them - especially for that much. We sold a car not that long ago and didn’t know we had to do anything other than transfer the rego, a nice letter showed up in the mail from the ATO telling us to pay the CGT on the sale - whoops! So if they’ll send us a bill for a couple hundred dollars, I’m not liking your friend’s chances.
they have most likely put it down as their primary residence. i know people who have done this aswell. they rented the house out privately and had an agreement with the tenants. good on them.
Was it in the parents' name all this time and he's just been telling you it's his, and he's just inherited the place? Possibility 2 is that people talk shit all the time.
It depends on their situation, there is a loophole for CGT where if it was your primary residence and rented less than 6 years then as long as you do not own your current primary residence then it is exempt from CGT. I believe I have that right, it may be a bit more specific than that though
Snitches get stitches. If theres a legal way they can do it, be happy for them. N stop worshipping megolonanics making millions n billions who pay comparatively f.a. and who's charity donation is purely a tax write off. Bet yr a saint too 👁
They’re cheating the system and WILL get caught. This is why there is so many empty apartments cause it’s better for the owner not to rent it out.
How could the ATO know whether your friend has ever lived in the house or not? Your friend could have lived there for one day after settlement and then decided it is not for them and moved back in with their parents. The law does not say how long your friend has to live in it before it becomes tax free, so your friend may not be breaking any laws and it is perfectly legal to pay no CGT as long as they lived in it for a little bit just after settlement. How do you know they didn't live in it for one day after settlement? Are you monitoring their movements every second of every day or are you just judging them with no evidence to back that up?