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abforan(Newbie)Newbie
21 Nov 2023

Hi. Australian citizen, left Australia to live overseas in Dec 2014 and rented out the family house. Returned in Dec 2021, didn't move back into family house (rented elsewhere as was too small with teenagers ! ) and continued renting it out, then sold it in November 2022.

My understanding is that because we sold the house while residents of Australia

the CGT 6 year exemption rule still applies, and the CGT calculation would be:

  • Sale price (less sale costs) minus Market value at time of renting out (Dec 2014) = capital gain amount X
  • apply 50% CGT resident exemption to X to get Y figure
  • also apply 6 year exemption but calculate non exemption period (roughly 2 years/8 years in this case) and multiply this by Y to get taxable capital gain figure Z

is this correct?


thanks

Andrew

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2 replies
747 views
2 replies

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Most helpful reply

Taxduck(Taxicorn)Taxicorn
21 Nov 2023

Looks like you've done your homework. This is the ATO link to the eligibility for the 6 year rule (which no doubt you have read) .https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/your-main-residence-home/treating-former-home-as-main-residence

No mention you need to be a resident of Australia for the duration of the 6 year period, only that you need to be a resident when you sell.

I think the rule was designed for those who are absent from their home for a number of years due to work opportunities and so aren't penalised for doing so. (often those work opportunities are overseas)

You haven't quite got your CGT calculation correct. It's sale price - market value plus sale costs (Called cost base). Apply your 6 year rule. Calculate the gain. 50% CGT discount is applied last. Calculate the times (6 years and total rental period) in days.

See the example in link.

Best to seek professional advice.

All replies

Most helpful reply

Taxduck(Taxicorn)Taxicorn
21 Nov 2023

Looks like you've done your homework. This is the ATO link to the eligibility for the 6 year rule (which no doubt you have read) .https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/your-main-residence-home/treating-former-home-as-main-residence

No mention you need to be a resident of Australia for the duration of the 6 year period, only that you need to be a resident when you sell.

I think the rule was designed for those who are absent from their home for a number of years due to work opportunities and so aren't penalised for doing so. (often those work opportunities are overseas)

You haven't quite got your CGT calculation correct. It's sale price - market value plus sale costs (Called cost base). Apply your 6 year rule. Calculate the gain. 50% CGT discount is applied last. Calculate the times (6 years and total rental period) in days.

See the example in link.

Best to seek professional advice.

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