CGT for married couple selling properties purchased before marriage

Hi,

My wife and I both own a property each that was purchased before we met. Her Property is in her sole name and my property is in my sole name.

Both property are now rented out and we live in a 3rd property that we purchased together after our marriage.

We are looking at selling both "old" properties. Now, her property was purchased in 2001 for $250k and she lived in it until 2008 where she started renting the place out, My property was purchased in 2008 for $300k and I lived in it until 2013 where I started renting the place out.

Her property would now sell for about $1.3M and mine for $700k.

My questions are:
- Would we both get some CGT exemption on each of our property since they were purchased before our marriage and are in each of our names independently? or since we are now married, would only one of us get some CGT exemption?
- How do I calculate whatever exemption we could potentially be getting?
-If only one of us would be getting some CGT exemption, I assume applying the exemption to her property would be favorable?

Thank you for your help.

 

1. yes
2. you should seek advice on apportioning
3. the one with the biggest gain would be more favourable perhaps

 

Thanks for the very quick response Terry, just wondering your answer to 1/ is it yes we will both get some exemption or yes only one of us will?

Cheers,

 

Personal tax advice is really needed.

You both can only claim ONE CGT exemption for the main residence exemption. Not each. But it can be shared for the time after you became spouses. However for the time prior to becoming spouses both will likely be exempt BUT at some time (and its often not "marriage" - Defacto periods may impact etc) then a choice must be made after that time - Which exemption are you BOTH going to use !! There will be issues involving choice here and apportioning and other factors will impact.

s118-192 "The Special Rule" also often impacts and its also not straight forward. Tax advice would support identifying the best possible tax outcome. If you are selling both thats a good thing as it means you arent making a guess and hoping the outcome is best for the future which can be uncertain. You will have a bit more clarity.

The advice should assist to estimate the final CGT and assist your plans.

One key issue for new spouses is that the main residence exemption after that date may only be available based upon fact for one of the parties but the choice is binding on the other. The other maybe can use the absence rule, maybe not. It can restrict what people think is a free choice.

 

Thank you Paul, I think it makes it "slightly" clearer... I think... hehe

Any recommendations in terms of how to select a tax agent to get the best info? I guess my local ITP office might not be the best choice... I live near Gosford NSW 2250.

Thanks,

 

LOL - I know a good one (If I say so).

Dont use a franchise - They often employ unqualified people who do a few nights training and I fix a lot of past issues from franchised offices. One example I fixed would have cost client $160K. Real basic property and tax issues.

 

Try Paul

 

Thanks, Terry & Paul for your help.

Paul, I think I will have to get in touch with you in the coming months when we get closer to putting our properties on the market.

Thanks again.
Sebastien.