Puzzle Finance Blog


How to qualify for the main-residence CGT exemption


How to qualify for the CGT main residence exemption
There are a number of rules and calculation methods that can apply to the main residence capital gains tax exemption. Of course, before they can be considered the property must be classified as a main residence.

The factors taken into account for a property to qualify as a residence include:
  • The length of time you have lived there
  • Whether your family live there
  • Whether it is used as your mailing address
  • Whether you have all of your personal possessions there
In the end one of the prime determining factors is your intention in occupying the property, which must be borne out by the facts.

There is no minimum time that must be met for a property to be classed as your main residence. This can mean when someone buys a property to live in, and after only a short period shifts interstate for personal reasons, as long as the property owner did not have another residence during this period the property will qualify for the CGT exemption.

One of the rules that does apply to the main residence exemption is that the property must be moved into as soon as practicable after its purchase. This can mean where there is a valid reason supported by the facts, such as illness or other unforeseen circumstances, the exemption will still apply if there is a delay between moving in and purchasing the property.

There is an area limit and two time limits that apply to the main residence exemption when it comes to land. The CGT residence exemption only applies on up to two hectares of land. For vacant land you have up to four years to class it as your main residence as long as during that time you construct a home and move into it as soon as practicable after its completion. Secondly the home must remain your residence for at least three months.

This can mean a person can have one main residence they live in while building a new home on land they have purchased. As long as the new home is constructed within the four years, and they live in the new home for at least three months, they will receive the main residence exemption for their original home and the new property.

There is another situation where the main residence exemption will apply to two properties for up to six months. This will occur when you purchase a new property, the original property was used as the main residence for a continuous period of three months over the previous 12 months of ownership, you don’t rent or produce income from the property during those 12 months, and you sell the original residence within six months of purchasing the new one.

Complications arise when a property is used as a main residence and for income producing purposes. As long as a person only has one residence that is not used to produce income, they can be absent from that residence indefinitely and still retain the main residence exemption. The exemption is still retained for a period of up to six years while the property is rented.

Normally when a property is first used as a residence and then is rented, capital gains tax is payable if the eventual selling price exceeds its market value when it ceased being a residence.

The exception is when the main residence exemption has been claimed when the owner was absent and has not had another main residence. In this situation the days that the property was a main residence, expressed as a percentage of the total days of ownership, is an exempt capital gain.

Posted by Max Hewham - Money - The Age on 5th January, 2011 | Comments | Trackbacks
Tags:

Bookmark and Share

The trackback URL for this page is http://www.puzzlefinance.com.au/trackback?post=23000063


Trackbacks

There are no trackbacks for this post


Comments

There are no comments for this post


Post a Comment

HTML is not allowed in comments, http://... will be automatically linked.


Name (required):


Email Address (not displayed):


Comment (required):


To help prevent spam, please enter the word hair here:

Puzzle Finance Blog

About Puzzle Finance


Archives

September 2017
August 2017
July 2017
June 2017
May 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010

Tags

Purchase or Rent (1)
The Age (1)

Recent Puzzle Finance Blog Posts

8 Sep 17: Why property investors aren’t necessarily as rich as you think they are Investors have surged in the Sydney and Melbourne property markets at  record levels  over the past few years, with many amassing significant prope... [More...]
5 Sep 17: ‘Risks magnified’ when investors use equity loans to buy multiple properties A common strategy used by property investors around Australia to amass large portfolios of real estate is potentially very risky, experts warn. More th... [More...]
30 Aug 17: Investors can own multiple properties but still be eligible for first-home buyer benefits A little-known loophole across all states and territories is allowing investors, who already own multiple properties, to take advantage of governmen... [More...]
29 Aug 17: A homeowner's guide to letting on Airbnb More and more homeowners are looking for ways to increase their household income. This includes looking to their family home to provide extra funds through Ai... [More...]
27 Aug 17: Organise finance early this spring property season  With more properties soon to hit the market, lenders will be stretched and house hunters should organise finance well ahead of time, prop... [More...]
26 Aug 17: The obvious mistakes first home buyers make JUST say you won the Lotto or a kindly relative left you a sizeable inheritance and, hooray, you have a deposit for a bedsit in a far-flung corner of Sydney.... [More...]