6 Year CGT Exemption

Viewing 6 posts - 1 through 6 (of 6 total)

jackie767
Member
@jackie767
Join Date: 2012
Post Count: 3
March 11, 2012 - 1:24 am
Hi
I have recently purchased a house which I would like to be my principal place of residence.
As I understand it if I move in there after settlement and then at some point move out again I can be exempt from CGT tax for up to 6 years?
Do I have to move into the property straight after settlement to be eligible for this 6 year exemption?
I was considering renting it out for the first year. If I rent the property out for a year, moved in for a year and then went overseas for 3 years and then came back and sold the property would I then have to pay capital gains tax for 4/5 years I was not in the property? ie Capital gain x 0.5 deduction (held prop for more than 1 year) x 4/5 liable to CGT?

Jackie
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
March 11, 2012 - 2:39 am
You can only get hte main residence exemption once you have established in as your main residence and this probably means moving in.
If you rent it out first hten it would be subject to CGT based on the time it was a rental. So if you rent 1 year out of 10 then 10% of the gain would be subject to CGT – but you would get the 50% CGT discount on this
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
jackie767
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@jackie767
Join Date: 2012
Post Count: 3
March 11, 2012 - 4:07 am
Thanks Terry
So are you saying then that the 6 year CGT exemption is only ever applicable if you move into the property straight way after buying it ?
If you rent it out firstly are you then never able to claim the 6 year CGT exemption?
Derek
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@derek
Join Date: 2004
Post Count: 3,544
March 11, 2012 - 4:27 am
HI Jackie,
No – Terry is saying that the 6 yr exemption rule only kicks in after you have initially moved in.
Based on your earlier post the time when you have a tenant in the property (just after purchase) will be subject to CGT. When you move in and establish the property as your PPOR you will then be eligible for the 6yr exemption rule should you move out again in the future and provided you do not buy another property and make this 'new' property your home.
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
March 11, 2012 - 9:46 am
Yes the 6 year rule can aplly after you move in and then out again.
So if you live in year 1 and then move out in year 2 then it could be CGT free from up to 6 years.
But if you rent it out for 1 year and then move in for 1 year and out again and rent it then the first 1 year will mean CGT applies but it could be exempt from the subsequent absence and this would probably mean you are only charged CGT on the percentage of the time you were renting it out for the initial period.
eg. you rent for 1 year first then it could be exempt for 6 years so CGT would be 1/7 years = CG x 1/7.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
jackie767
Member
@jackie767
Join Date: 2012
Post Count: 3
March 11, 2012 - 11:26 pm
Thanks Terry and Derek for your help on clarifying this. Much appreciated.