Can a married couple own a ppor each, and be exempt from cgt?

@Terry_w by the example link you gave and @Perthguy it seems correct that both houses can be exempt from capital gains tax.
The only reason in the example that they had to pay capital gains tax, was that they both had a share percentage in each home.

Going by the above ato example, if Kathy and Grahame had purchased 100% in there own name without a share difference between the 2 houses, then both houses would be exempt in the scenario.

 

Try the legislation if the ATO's explanation doesn't make any sense: section 118-170 ITAA 1997

Spouses can choose to have seperate main residences but if they do then they have the split the main residence exemption across the two properties for that period of time. Generally, only 50% of the gain on each property will be exempt but if you have an ownership structure other than 50%/50% for each spouse or 100% for one spouse then the maths is a bit more complicated and seems to produce a worse result (less than 50% of the gain will be exempt).

I'm not sure why anyone would choose to have seperate main residences. Wouldn't you both just choose the one which has the higher gain to be exempt? Maybe someone knows an example where it would be beneficial to do this (@Paul@PFI ), otherwise it's one of those silly choices which no one should make.

The only time when spouses can have seperate main residences and claim a 100% exemption across both properties is when they live permanently separately and apart from each other. This is not the case for the OP.

 

Yes, but only for 50% of the time during which they had seperate main residences.

 

Thanks Daniel, the link also confirms living apart scenario...

1) If, during a period, a * dwelling is your main residence and another * dwelling is the main residence of your * spouse (except a spouse living permanently separately and apart from you), you and your spouse must either:

In the original scenario I gave, the couple will be living apart interstate from each other for several years. 5-6.
So yes they are apart. Which seems perfectly legal to have to properties exempt from paying CGT on either house when selling, as long as they live seperate during that time.

 

But the living apart needs to be "permanent". If you are intending to return after a period of time (even if that period is several years) that isn't permanent.

I think what they are trying to capture by the "spouse living permanently separately and apart from you" exemption is where there has been a relationship breakdown and (in the case of marriage) waiting for a divorce. This guidance on a similar phrase in another context may help: 2.2.5.20 Determining Living Separately & Apart | Guide to Social Security Law.

 

But that info doesn't come from the ato, that's not what the ato say?Under the ato which you provided and the example earlier given from the ato, all state...

'except a spouse living permanently separately and apart from you'.

still confused, as it doesn't specify the seperate living conditions.

 

That is from the legislation but the phrase is not defined so you will have to look at the ordinary meaning of the words.

'Permanemtly' means forever. So if you do not ever intend to live with the spouse again you may be able to claim both properties

 

Jail, overseas etc. Fairly rare but does occur.

 

Thanks paul. What would happen in the above scenario after the 5-6 years expires and bob sells his house. Can bob sell his house without owing any CGT if it increases in value.
And what will happen to Jane's house if bob moves back there, will they be exempt from CGT, a period of time only, or pay CGT if when sell?

 

Spouse definition is also fairly broad and I have noted a more consistent and aggressive approach by Centrelink and ATO re same sex and defacto's attempting to skirt laws and double dip.

In tax law "permanently" is always forevere but general

IDK. Bob and Jane arent clients and I dont have all facts. But I would consider Bob and Jane need to discuss which main residence exemption (or how it is to be shared) they will use. Typically they might claim the first one being sold then accept their home has a pro-rata CGT issue which may never crystalise.

 

In essence, you can't have your cakes and eat them but you can have a cake but not eat the other until you pass.

 

This is how i understand it. Between spouses (not seperated) you can claim one residence as ppor at any given time. It gets interesting when 6 yr CGT exemption rule is applied. key is you decide only when you are selling if you want main residence exemption applied to property being sold....
so when bob decided to sell Perth as main residence no CGT applied however they should be liable for CGT for the same period of time for ppor in melb....however if you live in melb ppor for next 30 yrs that CGT shouldn't be much....even better if you die in melb ppor CGT free to your heirs..not advise

 

How about this scenario then:

IF myself and my partner had both purchased a property in our own names only, then went into a defacto relationship (not married), would we be liable for CGT? Seems a bit grey

 

Spouse= married or defacto

 

section 995-1(1) definitions:


"spouse " of an individual includes:

(a) another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a * State law or * Territory law prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; and

(b) another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple.


So for s.118-170 CGT main residence exemption, legally married persons but "permanently separated" are not impacted by this restriction.

However, the prior time to separation will be subject to s.118-170 and may result in only partial exemptions during this period.