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Re: 6 year rule capital gains

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I am hoping for some futher advice, I am getting conflicting information around the 6 year main residency rule.  I purchased a house in December 2001 which I lived in until July 2004, I then sold the house in August 2018.  Is the exemption used as the 6 year rule and not the partial exemption (I have had no other principal place of residence).

 

I have completed the Capital gains tax property exemption tool that calculated 2220 exemption days but the accountant has only used 969 which were the days that I lived in the property when I first purchused until renting in July 2004.  Is this the correct tool to be using for the 6 year exemption?

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Initiate

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Thank you so much for taking the time to provide responses.  This is how I was understanding how it should work.  When I asked my accountant he said the 6 year rule was not existent, I should of challenged him more as the return has been submitted!   

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Taxicorn

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The accountant is wrong.

 

As I don't know exact dates I will presume the following

 

Bought House 6/12/2011, lived in until moved out and rented 31/7/2004 (Total 969 days - Exempt)

 

You Rented the property from 1/8/2004 until 1/8/2010 (total 2192 days - exempt 6-year rule)

From 2/8/2010 until date sold  2/8/2018 you continued to rent it (2923 days)

 

Total ownership period = 6084 days, total days exempt = 3161, therefore, CGT applies to (6084-3161 = 2923 days)

So 2923/6084 days = 48.04% of Gain and then x 50% as held for longer than 12 months.

 

Don't forget to add in all costs of ownership from 6/12/2011 until 31/7/2004 as a Third element cost to your cost base:

 

https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/Cost-base/Ele...

 

These can only reduce a gain not increase a loss.

 

 

Initiate

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Thank you for the reply, I spent hours last night trying to undestand this all and thought the accountant was wrong.  The accountant also used the a valuation of the house in 2003 not the market value in 2004 which was higher.  

Would you mind giving me the calculations on my exact dates which where:

Commenced living in the house 1/12/2001

Commenced renting house 27/7/2004

Sold the property on 28/8/2018

 

Is it correct that the third elemant including interest, rates, insurance premiums should not be included if claimed as a deduction in previous years?

 

The cost base the accountant used was the selling price of $317,000 valuation from 2003 of $210,000 plus selling costs of $22217 minus special building write off of $22610.

Taxicorn

Replies 2

(1) Total days = 6115, days excluding first lived and 6-year rule = 2954,  therefore CGT rate = 48.31%

 

(2) Third Element costs were incurred during your initial stay (1/12/2001 - 26/7/2004) therefore not claimed as a rental expense.

 

(3) Cost base = Market Value when became rental (27/7/2004) Plus Buying costs, plus selling costs, minus capital works depreciation (special building write-off) claimed (26/7/2004 -28/08/18), plus 3rd element costs (1/12/2001 - 26/7/2004). You then subtract this from the proceeds of sale x 48.31 x 50%.

 

Hope this helps, sorry but I'm off to work...Smiley Happy

 

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Initiate

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Thank you so much for taking the time to provide responses.  This is how I was understanding how it should work.  When I asked my accountant he said the 6 year rule was not existent, I should of challenged him more as the return has been submitted!   

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Taxicorn

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Wait until it is lodged then file an Amendment to it.

 

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