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Re: Does the 6-year rule apply?

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Newbie

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2008 - I bought a home.

2008 - 2011 - Rented the home.

2011 - I moved in (family home - Primary residence).

2015 - I opened the master bedroom (separate entrance/partitioned off) to Airbnb guests. (17% floor space)

2018 - Selling the home.

 

Now during the whole period of time I have owned the home, I have had three years where it was 100% rented out, then another 3 years @ 17% earning an income. 

 

Now whilst I earned in income from the home (and did my tax return each year), I have earnt less than what I think I will need to pay in CGT.   Is this correct? 

 

My question is: Does the 6-year rule apply here and I only pay CGT on the income earnt for the period of time that I started earning Airbnb income (@17% floor space?)

Thank you

 

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ATO Certified

Anonymous

Replies 4

 

If you've used any part of your home to produce income – for example, by renting out part or all of it – you're generally not entitled to the full CGT exemption.

To work out the capital gain that is not exempt, you need to take into account a number of factors, including:

You can work out the proportion of your capital gain that is exempt from capital gains tax using the ATO  Property exemption tool.

 

This is all covered on the ATO website... https://www.ato.gov.au/General/Property/Your-home/Renting-out-part-or-all-of-your-home/

 

ATO general help line 13 28 61

5 REPLIES 5
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Best answer

ATO Certified

Anonymous

Replies 4

 

If you've used any part of your home to produce income – for example, by renting out part or all of it – you're generally not entitled to the full CGT exemption.

To work out the capital gain that is not exempt, you need to take into account a number of factors, including:

You can work out the proportion of your capital gain that is exempt from capital gains tax using the ATO  Property exemption tool.

 

This is all covered on the ATO website... https://www.ato.gov.au/General/Property/Your-home/Renting-out-part-or-all-of-your-home/

 

ATO general help line 13 28 61

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Newbie

Replies 3

Hello MVG,

 

Thank you for your prompt response.

 

But even though our primary residence was rented out for the first period of time, if we moved back into our home in 2011, does the 6-year rule exemption period 'reset' the GCT exemption period once again?

 

"When the dwelling is reoccupied as the main residence, the six-year exemption resets. So another six years of exemption is available from the date it next becomes income producing. " From <Information Source

 

2008 - I bought a home.

2008 - 2011 - Rented the home. = GCT would have applied only if we sold our home at this time

2011 - I moved in (family home - Primary residence). = 6-year rule "resets period GST exemption period"

2015 - I opened the master bedroom (separate entrance/partitioned off) to Airbnb guests. (17% floor space)

2018 - Selling the home. = As Airbnb < 6 years, CGT does not then apply

 

Also, if I do exceed the 6 years, then do I need only pay tax on the proportion of time that the property was rented for longer than 6 years?

 

Thank you

 

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Anonymous

Replies 2

I suggest the better way to address this so you get it right is to apply to the ATO for a  Private Ruling, and this will ensure that all your questions are answered .....  

 

Its a far better approach and you will have a written response that you can rely on ..

 

ATO 13 28 61

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Newbie

Replies 1

Thank you.

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Anonymous

Replies 0

no problems .. pls also refer to a more detailed response on your other post ... that is if it is your post ...https://community.ato.gov.au/t5/General-tax-questions/Main-residence-to-rental-property-CGT-question...