Author: Ally_(Initiate)Initiate 7 Feb 2025
To whom it may concern,
I am having an extremely difficult time finding an answer to the question above. Multiple accountants (including from the ATO) have given me conflicting answers. Per the link provided my circumstance relates closes to "Roya" (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).
I purchased my home in August 2014 for $440,000.
I lived in it until December 2016 (approximately 2 years) and it has been rented since.
I have not acquired another property in the meantime.
I am planning to sell it this financial year. I believe the maximum I will get for it is $650,000.
I do not know the market value at the time it was rented.
In the example provided by the ATO, "Roya rented out the apartment, she can treat it as her main residence during her absence for a maximum of 6 years. This is the period 29 September 1997 to 29 September 2003." This example does not define when Roya bought her apartment for $180,000 and how long she had it for prior to renting it out.
Am I correct in believing I can treat my property as my main residence for a further 6 years during my absence? This period being December 2016 (first rented) to December 2022 NOT from August 2014 (when purchased) to August 2020.
Making me liable for CGT for the time period AFTER December 2022?
Additionally, where can I locate a retrospective market value that the ATO would accept?
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1 replies
The 6 year rule starts when you have rented out a former main residence property. The 6 years starts from 2016 and the 6 years rule can be reset by moving back in.
The roya example doesn't define when, because the purchase date is not relevant for the CGT calculation for a property that was initially main residence turned into investment property. You use the market price at the time of first rent and that date is when ownership begins for CGT purposes.
Assuming you didn't receive rental income from the property when [at the time] you purchased the property, you did not move back in after renting it out, Australian tax resident at time you sell it and you do not have a spouse. You have said you moved in [at the start] and you don't have another property.
- August 2014 to Dec 2016 - main residence exemption because you lived in it
- Dec 2016 to Dec 2022 - 6 year main residence for a former home that is rented out,
- Dec 2022 till you sell it - you are liable for CGT on these days.
You should seek a professional valuer or real estate agent for retrospective/backdated/historical valuation of the property on the day of first rent. The market valuation would be your cost base for the property. You can add the valuation fee to the cost base.
EDIT: The CGT calculation, you should calculate from Dec 2016. Then apply the main residence exemption by portioning it. This would be your total capital gains. After applying losses then discount, your net capital gains. If you're unsure of CGT calculation you can seek a tax agent. Australian tax residents have the CGT discount, foreign tax residents don't get the CGT discount. The CGT discount would be reduced if you were foreign resident during period there is CGT liability.
Hopefully, this covers most of the CGT questions.
