ATO Community

Re: CGT Exemption

Initiate

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Replies 9

Hello,

 

I need some advice on CGT exemption eligibility.

 

- We bought an apartment in 2010 and lived there for 8 years before moving to a new apartment

- Post moving to the new apartment, we rented out the old apartment in 2018 till date (~1.5 years)

- We are planning to sell the old apartment this year; however will be living there for 4 weeks post the tenant moves out in July

 

Is the old apartment eligible for CGT exemption?

 

Thank you,

RB

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Most helpful response

ATO Community Support

Replies 7

Hello @rajibedi

 

@Logical_smsf  has provided a great response and based on the information you've provided, you would not be eligible for a full main residence exemption as you did not live in the property for the entire time you owned it, and you used it to produce income.

 

Even though you are not eligible for a full exemption, you may be eligible for a partial exemption, however you would need to know what the market value was when you first used it to produce income

 

I recommend having a look at the following:

 

TonyATO

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Devotee

Replies 8

@rajibedi 

The simple answer to your question is "NO"

to explain little further how the CGT exemption works, read below

but to get the CGT exemption on your first property you need to be living there for 6 months not 4 weeks, and secondly I assume that you still have a second apartment that you called your principle place of residence since 2018 and will claim CGT on that, so now the apartment 2 is eligible for CGT not the first one, If you want to claim the CGT exemtion on the first one, you can still do it, but then you will need to pay/calculate CGT on the second apartment from 2018 till you sell apartment 1

 

Most helpful response

ATO Community Support

Replies 7

Hello @rajibedi

 

@Logical_smsf  has provided a great response and based on the information you've provided, you would not be eligible for a full main residence exemption as you did not live in the property for the entire time you owned it, and you used it to produce income.

 

Even though you are not eligible for a full exemption, you may be eligible for a partial exemption, however you would need to know what the market value was when you first used it to produce income

 

I recommend having a look at the following:

 

TonyATO

Initiate

Replies 6

Thank you @Logical_smsf & Toni for your guidance.

Community Moderator

Replies 5

Hi @rajibedi 

 

You are able to consider using your original home as your main residence for up to 6 years after you move out. It would mean that you new home would be subject to CGT.

 

 

Treating a dwelling as your main residence after you move out.

Initiate

Replies 4

Hi Kylie,

 

Does this means I can get full CGT exemption when I sell my old home? If that's the case, do I then only pay CGT in future on the new home (main residence) (whenever I decide to sell it) for a period between 'moving in to new

home' and 'selling old home'?

 

Cheers,

RB

ATO Community Support

Replies 3

Hi @rajibedi,

 

You mentioned you moved into a new apartment and began renting out your old apartment. You can only have one main residence at any given time. Did you purchase the new apartment? If the answer is Yes the 6yr absence rule would not apply to the original apartment. As generally the new apartment becomes the main residence.

 

You will need to know market value of your old home at the time you first started using it to produce asessable income. You will be liable for capital gains tax (CGT) for the time it was rented until you moved back in (if you sold the 2nd property).

 

If you only rented the entire time you did not live in your original property then the 6yr absence rule would apply and you would not be liable for CGT.

 

Links -

Main residence.

6yr absence rule.

Market value when first used to produce assessable income.

Working out your capital gain or loss.

 

All the best.

Initiate

Replies 2

Thank you @Jodie_ATO. This clarifies it all (to answer your question, the 2nd property was purchased when we moved in).

 

We are also assessing below scenario and would appreciate your guidance:

- Once international travel resumes, we are keen to bring our parents to live close-by in Melbourne

- If we decide to keep both Southbank (as Secondary residence where our parents will reside) and Docklands (Main residence) apartments, what are our Land tax implications?

- What are the CGT implications on Southbank apartment when we decide to sell it in the distant future?

 

Cheers,

Raji

ATO Community Support

Replies 1

Hi @rajibedi,

 

If you retain the original property you will still be liable for capital gains tax (CGT) for the timeframe you have owned 2 properties. You can only have one main residence exemption at any given time unless you are moving from one property to another and selling the property you are leaving. This scenario allows a 6month period where CGT would not be relevant. However your circumstances are not moving and selling within 6mnths. 

 

Capital gains tax for your rental property will be calculated from when you first rented it out until you sell or dipose of it. Having your parents live there is very kind of you, but it would not change your CGT obligations. It may also change what expenses you can claim.

 

Land tax is a state government charge, you can google it and find out the laws/requirements in your state.

 

Please use the other links for further information.  

 

Links -

Partial exemption.

Commercial or non commercial rates.

 

Al the best.

Initiate

Replies 0

Thank you @Jodie_ATO. Appreciate your guidance.