Capital Gains Tax – Main Residence Exemption

Luckily, capital gains tax does not apply to your home i.e. ‘main residence’, unlike other assets that you may sell. Unfortunately, as is usually the case with tax, the details can become mind boggling.

If you acquire a new property that is to become your new main residence before you dispose of your existing main residence, the ATO allows the main residence exemption to apply to both properties until the existing property is disposed of, or for a maximum of six months, whichever is the shorter period. However, this can only apply if:
• The existing main residence was your main residence for a continuous period of at least three months in the 12 months before it is sold;
• The existing main residence was not used for income-producing purposes at any time during that 12-month period when it was not your main residence; and
• The new property becomes your main residence.

If it takes longer than six months to dispose of your old home, both homes are exempt only for the last six months before you dispose of the old one. You can choose to either treat the existing property as your main residence for the entire time before it is disposed of, or your new property as the main residence from the time you move in.

If you treat your existing property as your main residence for the entire time up to disposal more than six months later, you can only get a partial exemption when you dispose of your new home.

If instead you decide to claim the main residence exemption for your new property from the time you first move in, then your old home will be only partially exempt from CGT.

If you would like to know more, please contact one of our friendly accountants at HQB Chartered Accountants.

– Posted 29.9.17

Hannah Edwards

This article is compiled as a helpful guide for your private information and is subject to copyright. We suggest that you do not act solely on the basis of material contained in this article because items are of general nature only and may be liable to misinterpretation in particular circumstances. We recommend that our advice be sought before acting on any of these crucial areas.