Hi
We have sold two main residences in FY25 and we just wanted to make sure our understanding is correct -
- Property A – bought in Sep 2014, sold in Mar 2025, PPOR from Sep 2014 to Sep 2024 then rented out to 3rd party until it was sold in Mar 2025.
- Property B – off the plan apartment purchased in 2022, settled in Sep 2024 (and we moved and lived from Property A to Property B in Sep 24), sold in Jun 2025 and settled in July 2025. rented out to related party at arm’s length in June 2025 until it was settled in end Jul 2025 (as we moved from Property B to Property C in May 2025 once Property C settled and that we have a relative visiting us from June 2025 so we rented out to them during their visit in Australia).
- Property C – purchased in Feb 2025 and settled in May 2025 (and we moved and lived from Property B to Property C in May 2025).
My understanding is –
Property A – I made the choice to treat Property B as my PPOR from Sep 24. As such, I’m relying on SECTION 118-192 Special rule for first use to produce income where I am calculating CGT gains/losses based on the market value when it was firstly available for rent (i.e. Sep 24) and the $ when it was sold (i.e. Mar 2025). In my case, I have a capital loss which I’m allowed to include it into my tax return.
Property B – again, I made a choice to treat Property C as my PPOR from May 25 (when Property C settles). As such, I’m relying on SECTION 118-192 Special rule for first use to produce income where I am calculating CGT gains/losses based on the market value when it was firstly available for rent (end May 2025) and the $ when it was sold (i.e. in Jun 2025). In my case, I have a capital loss which I’m allowed to include it into my tax return.
I don’t have any concern re. PPOR/main residence status on all three properties (the whole family moved with furniture moved and utilities connected etc), I’m also not concerned re. treatment on Property A per above. Regarding valuation, I have obtained valuation letter from real estate agent as well as valuation letter from a registered valuer (for both property A & B valuation).
Re. my proposed treatment on Property B, the rental period is a bit short (only rented from June and late July 2025 so probably 1.5 month) and it was rented to a relative (with rent deposited into our bank account). The fact that the rental arrangement starts post the contract date (6 June) but this is still within our ownership of property B*, the lease agreement is also not the contract as we were dealing with relatives.
We do have capital gains on other properties this year and these two just happened to be able to report as capital losses due to being able utilising Section 118-192 (and you don’t have a choice^). We would like to make sure we cover ourselves in all aspects and do not risk an ATO review because of the treatment.
*
https://www.ato.gov.au/forms-and-instructions/capital-gains-tax-guide-2021/whats-new/real-estate-and-main-residence/what-is-an-ownership-interest says you have legal ownership of a dwelling or land from the date of settlement of the contract of purchase (or if you have a right to occupy it at an earlier time, that time) until the date of settlement of the contract of sale. This period is called your ownership period.
^ Home first used to produce income https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/your-main-residence-home/using-your-home-for-rental-or-business
If you start using part or all of your main residence to produce income for the first time after 20 August 1996, a special rule affects the way you calculate your capital gain or capital loss.
In this case, you are taken to have acquired the dwelling at its market value at the time you first used it to produce income if all of the following apply:
- you acquired the dwelling on or after 20 September 1985
- you first used the dwelling to produce income after 20 August 1996
- when a CGT event happens to the dwelling, you would get only a partial exemption, because you used the dwelling to produce assessable income during the period you owned it
- you would have been entitled to a full exemption if the CGT event happened to the dwelling immediately before you first used it to produce income.
If all of the above apply, you must work out your capital gain or capital loss using the market value of the dwelling at the time you first used it to produce income. You do not have a choice.
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