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Capital gains tax and your own private home

If you sell an asset you will typically make a capital gain or loss, which is the difference between your initial purchase cost and the amount you receive when you sell the asset.

In most cases, personal assets are exempt from capital gains tax (CGT), such as your home and car. The same applies to depreciating assets used for taxable purposes, such as business equipment or fittings in a rental property.

However, there are some circumstances when CGT can apply to your home, so it is important you understand if and when CGT applies.

  • If you acquired your property before September 1985, GGT does not apply.
  • You can only have one main residence at a time, unless one is sold within six months of the other if certain conditions are met.
  • If you moved into your home as soon as practicable after acquiring it, you can treat it as your main residence from the acquisition date. Otherwise, you can treat it as your main residence from the occupation date.
  • You can choose to treat your home as your main residence if you are away for an extended period, as long as no other home is treated as a main residence for the same period.
  • If your home is used to produce assessable income (e.g., rent), your home can only be treated as a main residence during an absence for up to six years. If the six years has passed or you have another main residence, you should arrange a market valuation of your home, which will become the cost base for working out CGT.
  • If you purchased your land and constructed your home, it can qualify for an exemption for up to four years during the period of construction or renovation if certain conditions are met.
  • If you have up to two hectares of adjacent land used for private purposes and it is sold with your home, the CGT exemption applies. If more than two hectares, you need to apportion your cost base between the dwelling and land component. If the latter is the case, then you should keep your rates notice or get the selling agent to provide you with a valuation of the rest of the property. In addition to your rates notices, you should also keep track of insurance repairs and interest repayments to add them to your cost base when it comes time to sell.
  • If you do not have a rates notice or market valuation from the time of purchase, a licensed valuer can provide assistance under certain circumstances.

If you are selling and are still unsure about whether CGT applies, chat to our team today on (03) 5331 3711 or visit the ATO website.

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