Tax Tip 23: The 6 year Absent from Main Residence Rule

You just answered your own question before you asked it.

 

Perhaps, perhaps not.

If you move into a property intending to move out its hardly a intention to reside for the forseeable future and establish the premises as your main residence. If you move in and a situation occurs that forces your hand its different. Many issues can impact this issue and personal advice is important. Its the taxpayer obligation to satsify the ATO. No time limits to amend this type of issue so it could hang over your head a long time if its wrong

Generally, if you ask it could be a sign of a concern.

 

The reason I asked is after I moved in, I found that travel time to get home is too long, can't reach home before 6 to pick up kid. So we are thinking of renting a house near working place. It is unintentional.

 

Thanks Terry, I understand

 

@Terry_w this is really great. Seriously you are very very generous with your time and information. Thank you!

I lived in my property for an initial few months (about 3) then rented it on airbnb or to individuals by room for the rest of the time. The income was provided to the tax man and i claimed on expenses apportioned to the percentage of the property being occupied and generating income.

In this case, come time for selling, i am assuming that i will be liable to CGT apportioned to the part of the property rented out and for the set period that it was rented out?

 

Then if you had fully occupied and changed mind its likely to be OK. I have also seen people who ask about moving before they get there (ie a OTP purchase) and try a myriad of questions around a loophole to mask the fact they never really move in fully.

 

Perhaps. The main residence absence rule may assist but if you resided there it may be a apportioning issue. Vague

 

Thanks so really is open to interpretation?

 

Your post is open to interpretation. The law is more established.

 

Not sure what that means?

 

The situation in your post was vague and could result in different outcomes depending on what actually the situation is.

 

Have read every post, many many thanks Terry and others.
Seeking clarification re below. Apologies for the 2nd, I'm horrible with tax.

1) I currently rent inner-city Sydney and am looking to buy my first property. I'd need to live much further away from city (work) and am worried QoL could go down more than it's worth. If this happens and I decide to move out and return to renting elsewhere (while renting out my PPOR), is the 6-year rule likely to apply? I presume in cases where someone has moved within same suburb for example it surely doesn't.

2) I buy a property in 2017. Move out 2020 & sell in 2030. Does CGT tax apply for years 2026-30 or 2020-30?

Many Thanks.

 

I have another tax tip on this.

 

1. The 6 year rule may be satisfied. The location of where you reside is not a factor to consider. In theory you can move next door.

2. When you move out in 2020 the CGT costbase resets to its market value. If you later sell in 2030 the CGT profit is determined based on this then pro-rata exemption allowed. You would use no of days but roughly lets say :

Total CGT profit x 4/10
4/10th being 4 taxable years 2026-2030 over the period since moving out (10 years)

 

How would this work if i moved out of house #1 (PPOR) into house #2 (new PPOR) it sat vacant for a year while tidying it up and then selling it.

since it wasnt income producing do i not have to declare it on my tax return hence not pay any capital gains?

would this then cause any issues if i sell house #2 (PPOR) down the track?

 

You have the choice. But if you claimed 1 the 2 will be subject to cgt

 

Hi All,

I was hoping you might be able to provide some general advice on the below:

• 2005 Property 1 purchased and lived in for 12 months, rented until sold in 2017.
• 2010 Property 2 purchased and lived in until current

Questions

1. Can Property 1 be classed as PPOR until 2010 (when 2nd property was purchased) with a CGT exemption using (days rented/total days of ownership)?
2. Can Property 2 be classed as the PPOR from the purchase date?
3. Will Property 2 be CGT exempt using this method?

 

1. possibly.
2. possibly
3. possibly if it meets all the other requirements.

 

Thanks @Terryw. Does that mean when there are two potential PPOR properties, the date a property becomes a PPOR can be determined by the individual as long as it meets the requirements of a PPOR?

Because a second property is purchased and becomes the PPOR it doesn't remove all PPOR benefits for the first property and an exemption including the 6 year rule can be applied for the fist property up until this date?

 

Yep, that is right.