Under ordinary circumstances the sale of a property that you purchased after 20 September 1985 would attract Capital Gains Tax (CGT). Any gain made on the sale is included in your assessable income in that financial year. The gain from the sale of a CGT asset can be reduced by 50% when you have held the asset for more than a year.
However you can potentially avoid paying CGT entirely if you sell a dwelling that is considered to be your main place of residence, under the ATO’s main residence exemption.
What is Considered Your Main Residence?
Some of the factors the ATO considers relevant when identifying your main residence are whether you and your family live there, whether you have moved your belongings into the home, where your mail is delivered, your electoral roll address and the connection of services and utilites.
Only One Main Residence at a Time
The overriding rule is that you can only have one main residence at any given point in time, unless you are in the process of buying your home and purchasing another at the same time, in which case you may be eligible for an overlap period.
The Main Residence Exemption
If you’ve lived in your home for the whole time you’ve owned it, haven’t rented it out and the land is smaller than two hectares, you’ll get a full exemption on CGT when you sell.
However there are many scenarios which are more complicated when a full or at least partial exemption may still be applicable, for example;
- When you no longer live there,
- You have rented out your home,
- You had an investment property first, then it became your main residence,
- You have a main residence that is different to your spouse,You are using your main residence as a business.
We recommend you speak with your accountant about these more complex examples to discuss whether you can obtain any exemption and how CGT will be calculated. Please call us if you’d like to discuss.