Personal Income Tax

Capital Gains Tax - Main Residence Exemption

You must report capital gains and losses as part of your income tax and pay tax on any capital gains. While this is known as capital gains tax (CGT), it is part of the income tax you pay so it becomes part of your assessable income. Where you have a capital loss, you cannot claim this amount against your income but you can use to reduce any capital gains.

CGT applies to all assets acquired since September 20, 1985, but your personal assets including your home are exempt. It also does not apply to business fittings or equipment in a rental property that are depreciating assets for the purpose of tax.

Main residence exemption

Any capital gains from your main residence is exempt from CGT. This is because you do not use it to make assessable income.

Delay in moving into a new home

Sometimes there can be a delay in moving into your new home due to unforeseen circumstances. Where this occurs, your main residence exemption applies from the date of property settlement for the new home as long as you move in as soon as possible. But, if you were waiting for an existing tenant to move out, this is not an acceptable reason for the delay. Any rent received during that period will be subject to CGT as it is assessable income, so the exemption will not apply to the new property from the date of settlement.

Maintaining more than one main residence

Often you may buy a new home before selling the one you are living in. When this happens, you can treat both properties as your main residence for whichever one is the shortest period of time:

  • Six months — this is referred to as the six months rule.

  • The period of time it takes between selling you old home after you buy a new one.

The exemption for both properties only applies if:

  • The new property becomes your new residence.

  • The the old property was you main residence for at least three months of the 12 months before putting it on the market.

  • You did not use it to produce income for any part of the 12 months it was on the market for sale.

If the old residence takes longer than six months to sell, you may want to treat it as your main residence to receive the full exemption for tax purposes. But this could impact your ability to receive a full exemption on the new property when you sell it in the future.

Ask for advice

CGT is complex so it is wise to get the advice of your accountant before you make any decisions that will affect your assessable income or CGT exemption.





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