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B_A
Newbie

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I am hoping I can get some help. I bought a unit and lived there for 2years. I then started renting it out and did so for 7 years. I then moved back in for another year before finally selling. I’m just curious as I saw 2 very different examples on the ATO website about how to calculate my CGT. I understand I went past the 6 year exemption so do I now pay CGT on the 7 years it was rented out or just the year over the exemption.
Bought for $339000. Sold for $410000

Thanks.
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ATO Certified

TaxTime Support

Replies 0

Hi @B_A

 

Welcome to our Community.

 

It sounds like you are hoping to apply the main residence capital gains tax (CGT) exemption to the first six years that the property was being rented out. Generally you can do this but only if you weren't treating another dwelling as your main residence for that period.

 

For more information about your main residence and how the exemption applies as well as how treating a dwelling as your main residence after you move out works, have a look at our website.

 

As @macfanboy has correctly said, if the property was rented out for a continuous period of seven years and the main residence exemption applied to the first six years, the capital gain will only apply to one year (the seventh year it was rented out).

 

If you rent out the dwelling for more than six years, the **bleep**me first used to produce income rule may apply, which means you are taken to have acquired the dwelling at its market value at the time you first used it to produce income.

 

For more information about this rule, check out the value of home when first used to produce income section of the using your home to produce income page of our website. Have a look at the example about Roya as that will help you with your scenario.

 

The difference between you and Roya is that you moved back in for one more year before you sold it while Roya didn't, otherwise the concept is the same. You will just need to make an adjustment to the calculation to account for that.

 

To work out your ownership period, you need to look at the date the property was first used to produce income as well as the date the sale contract settled.

 

To work out the non-main residence days, you just need to look at the date of the day following the expiry of the six year exemption period and the date of the day prior to you moving back in.

 

Using Roya's example, you should then be able to work out the rest from there.

 

Also, don't forget that the example is there to demonstrate how the main residence exemption and the home first used to produce income rules interact. You should also check out the working out your capital gain or loss page for additional guidance.

 

Hope this helps.

 

Thanks,

 

ChrisR

3 REPLIES 3

Taxicorn

Replies 2

CGT calculated on the 1 year out of the ownership period.

 

B_A
Newbie

Replies 1

Without all the details obviously it will be a rough estimate but what kind of figure would I be looking at?

Best answer

ATO Certified

TaxTime Support

Replies 0

Hi @B_A

 

Welcome to our Community.

 

It sounds like you are hoping to apply the main residence capital gains tax (CGT) exemption to the first six years that the property was being rented out. Generally you can do this but only if you weren't treating another dwelling as your main residence for that period.

 

For more information about your main residence and how the exemption applies as well as how treating a dwelling as your main residence after you move out works, have a look at our website.

 

As @macfanboy has correctly said, if the property was rented out for a continuous period of seven years and the main residence exemption applied to the first six years, the capital gain will only apply to one year (the seventh year it was rented out).

 

If you rent out the dwelling for more than six years, the **bleep**me first used to produce income rule may apply, which means you are taken to have acquired the dwelling at its market value at the time you first used it to produce income.

 

For more information about this rule, check out the value of home when first used to produce income section of the using your home to produce income page of our website. Have a look at the example about Roya as that will help you with your scenario.

 

The difference between you and Roya is that you moved back in for one more year before you sold it while Roya didn't, otherwise the concept is the same. You will just need to make an adjustment to the calculation to account for that.

 

To work out your ownership period, you need to look at the date the property was first used to produce income as well as the date the sale contract settled.

 

To work out the non-main residence days, you just need to look at the date of the day following the expiry of the six year exemption period and the date of the day prior to you moving back in.

 

Using Roya's example, you should then be able to work out the rest from there.

 

Also, don't forget that the example is there to demonstrate how the main residence exemption and the home first used to produce income rules interact. You should also check out the working out your capital gain or loss page for additional guidance.

 

Hope this helps.

 

Thanks,

 

ChrisR

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