Capital Gains
6. Main Residence Exemption
Authors: Whitehead Michelle
Firm / Chambers:
Last updated: 13 Sep 2015
- Another important CGT concession is the ‘main residence exemption’ which means that the sale of your family home is generally exempt from CGT. This may be either a partial or a full exemption.
- You are likely to qualify for the full CGT main residence exemption if:
- the house was your main residence for the entire time that you have owned it; and
- it has never been used in the production of assessable income. This means you have never rented it out or used it for business purposes such as a home office.
- There is no definition of 'main residence' in the relevant taxation law. Instead the ATO will consider a number of factors when determining whether a particular dwelling is subject to a full or partial exemption as a main residence.
- In Taxation Determination TD 51 the ATO lists a number of these factors including:
- the length of time that you have lived in the dwelling;
- whether your family lives there with you;
- whether you have moved your personal belongings into the dwelling;
- the address where you have your mail delivered;
- the address you have specified on the electoral roll;
- whether the dwelling is connected to relevant services such as phone, gas and electricity; and
- your intention in occupying the dwelling.
- If you have lived in a dwelling for more than 12 months you should generally be able to meet the main residence exemption criteria unless you have more than one main residence. If you have lived there for less than 12 months you are likely to have more difficulty in establishing that the main residence exemption applies.
- You may also have difficulty qualifying for the exemption if the property has been used to produce income or if you have had long periods of absence from the property.
- In these circumstances it is important that you keep proper documentation of the periods in which the property is used for producing income or when you are absent.
- For example a property can continue to be classified as a main residence even if it is used to earn income for a period of 6 years. If you start out living in a house as your main residence then rent it out for up to 6 years before re-establishing it as your main residence it will qualify as a main residence for the whole period of ownership.
- If you have used part of the property for the production of assessable income you will only qualify for a partial CGT main residence exemption. Any capital gain will be assessed on that part of the property which has been used for income production and which therefore does not qualify for the main residence exemption.
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