Main residence CGT and 6 year rule

[#1]

Hi there, 

My wife and bought a Sydney property in Oct are waiting on settlement date in Nov after which, we intend to move in right away. My employer has now indictaed that I may be transferred interstate to Melbourne at the end of the year (Dec) shortly after settlement of our new home occurs which means we may not be living in it very long (only a few weeks).

If I move interstate and rent a place in Mebourne for the time my family and I are there (i.e no purchase), will I be able to rent my Syd house out and apply the 6 year CGT exception rule?

Specifically, I'm trying to confirm if the CGT 6 year rule will still apply to me even though I may only live in the Syd house as my main residence for a short (4-6 weeks) timeframe before potentially having to move interstate with work.

Thank you!  

[#2]

Hi @sdshakur,

This is an interesting scenario because of the timing between settlement and relocating.

There are a few factors that need to considered including if youre a resident for tax purposes or not.

Have a look at information about CGT and moving house, because one of the factors talks about living in Sydney for at least 3 out of the 12 months before moving to be exempt from CGT.

I hope this helps.

[#3 · Accepted solution]

Hi @CaroATO,

I didn't read this question as one relating to tax residency - @sdshakur can you please clarify what you are asking?

I read it to essentially be is living in the Syd house for a few weeks enough to establish it as a "main residence" to trigger the beginning of the 6 year rule. For me, given you intention was to live in it (based on what you have said) and circumstances changed largely out of your control, yes it probably would be. There is no minimum time limit you need to live in a house for it to qualify (but obviously short periods bring into question whether it was acutally your main residence).

I would suggest you get a private ruling from the ATO however to be sure because it's an expensive mistake if you get it wrong.

[#4]

Hi @MCA_Accountants  - yes you're right that is exactly what I'm trying to ascertain, if the 6 year rule can be relied upon even under such a short live in period . Like you said, I feel this would be out of my control amd I would be renting in Melb and not purchasing a new main residence.

How do I get an official ATO ruling?

Thanks.

[#5]

Info on private rulings is at https://www.ato.gov.au/general/ato-advice-and-guidance/ato-advice-products-(rulings)/private-rulings...

The 6 month threshold mentioned in one of the links the ATO gave is about a maximum time you can have two main residences (i.e. brought your new one before you sold your exisiting one).

I didn't spot the reference to the 3 month threshold in the link provided by the ATO (so can't comment on that specifically), but whether you have established a house as your "home" is dependent on the facts of each case and there is no minimum threshold set by Law. 

[#6]

Hi @sdshakur

@MCA_Accountants is correct. Our early engagement team can offer a ruling as an assured way of  moving forward.

That said we also have a definition of when a dwelling is your main residence and that may be helpful to you as well.

[#7]

Hi, thanks for your response. I've previously read the ATO guidelines about main residence and moving house. The 3 months living requirement you referenced appears to relate and apply to when you're purchasing and moving to another main residence amd wish to treat both as your main residence while you sell the first one. This is not the case fo me (will be renting in new location) so I'm not sure the 3 month rule would apply to me?