Capital Gains Tax.... Principal Residence

[WebBoard]

From: Iona .


My son purchased a property from me in 2000: contract dated July, took possession in July, settlement was in October. He now wants to sell this house by auctioning it in August. Will he qualify for the principal residence exemption from Capital Gains Tax? Or, has he owned and lived in it for too short a time....
Thank you in anticipation for help with this.
Regards, Iona.

 

[Mike]

Reply: 1
From: Mike .


Hi Iona,

This is what the 98-99 ATO Guide to Capital Gains Tax says in relation to full exemption:

To qualify for full exemption, the dwelling must have been your home for the whole period you owned it and must not have been used to produce assessable income.

A dwelling is considered to be your main residence from the time you acquired your ownership interest in it if you moved into it as soon as practicable after its purchase.

CGT legislation does not specify a minimum time that a person has to live in a home before it is considered to be their main residence; what is important is that it is your main residence.

So, Iona, since you say your son owned and lived in it and can satisfy the ATO by way of utility statements, address registered on electoral roll, had mail delivered to this address etc, then any future sale should be fully exempt. If you are still unsure then seek a Private Ruling from the ATO.

Regards, Mike

 

[DaleGG]

Reply: 2
From: Dale Gatherum-Goss


Hi

The answer is yes he can claim the exemption by electing that the house was his sole principal residence for that time. The tax guide is not always complete and this is understandable when you realize how complex Capital Gains Tax law really is.

As an aside, you can rent your house whilst away from it for a maximum of 6 years and still claim it as your principle residence. This was originally so the pollies can go overseas as a diplomat and still not pay tax!!!! We can take advantage of the same laws.

I hope that this helps

Dale
CPA

 

[WebBoard]

Reply: 1.1
From: Iona .


Thank you Mike and Dale for your help.
Iona

 

[WebBoard]

Reply: 2.1
From: Nic Hutty


To All,
We are currently taking advantage of the 6 yr rule where we rent out our house in Brisbane for 6 yrs before we go back or sell or whatever we decide to do, in the mean time we have purchased a house in Melbourne and have currently 2 principal places of residence which we can do because it is a house in another state and there is no choice for us to be able to live in our Brisbane house, thus this has become our first investment property.]
Hutty