Author: BlakeATO(Community Support)Community Support 27 Apr 2022
Hi @TaxPayer13
There are a few factors missing in this scenario, so we can’t give a flat answer.
As a general rule, the rented portion and the rented portion of shared spaces is liable for CGT for the time it’s genuinely available for rent or being rented. You’ve said it’s 20% of the land and for 80% of the time it was owned, so 16% would be liable for CGT, assuming all other rules are met. But we can’t tell you how much CGT will apply for a few reasons.
To use the main residence exemption, the person has to be a tax resident to start with. The property has to be genuinely occupied as their main residence. Assuming both these factors are met, then it depends when the granny flat was first genuinely available for rent.
We say that the calculation of the part that would be liable for CGT will be the floor space of the rented out space, plus their portion of shared spaces. So the “Granny flat occupies 200sq meters, main residence occupies 800sq meters, overall area of land is 1000sq meters” needs to be looked at a little more. What portion do they share? Does that calculation include the driveway and shares garden/yard areas?
When the property is sold, has it only been a main residence for the owner? If it wasn’t their main residence at any point it will impact the CGT, too.
How much tax is payable on the gain they make will depend factors like:
- how they calculate their capital gain, including the depreciation claimed as deductions on the other returns
- whether they choose to apply the CGT discount
- what their income is that year.
And this all assumes that legislation doesn’t change in the next ten years, either!
You can read about using your home for rental or business and CGT when selling your rental property on our website.
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