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

The issue and choices that arise from where you live after moving out in each case is also a important factor. Only ONE property may be a main residence at any day. This may mean that two properties are potentially exempt but you may elect which is not taxed in the manner you calculate and report gains

In 1 and 2 a valuation at the date the property is first used to produce rent will reset the costbase to the market on that relevant date. eg In example 2 The profit based on the value at 5years is apportioned between exempt periods and taxable periods. Not the date after the exemption ends.

 

Quick question if you'd be so kind.

Does the 6 year rule clock start ticking when:
a) owner has moved out (commenced renting elsewhere); or
b) when the property begins generating income (a tenancy commences) ?

 

My understanding is that it is the days producing income that count. You also need to be careful that you don't claim expenses for the non-incoming producing days against the income.
I'm not qualified to give advice (I'm only a former landlord who has been in the same position), so check with a professional on this.

 

I've actually written a draft tip on this. Will post tomorrow. It is neither.

 

Tax Tip 258: Timing of the 6 year Rule – when does it start

 

Cheers Terry.
I’ll submit a follow up question in that thread.

 

RE: The 1 main residence rule.

If I own PPOR 1 for > 6 years and then move out. Property is then rented (thus become IP 1)

If I buy another PPOR, how is the original property treated for tax purposes?

 

It could be exempt, or the cost base reset to market value as of the date first income producing.

 

Hi... I’m new here and this is my first post. Please excuse my ignorance if I’ve miss a step or two.. I’ve read this forum with interest and keen to ask a question and appreciate your feedback.

I’ve bought a property (no. 1) in 1993 and made it my main residence till I moved out to property no. 2 in 2003. I’ve rented it out since.
Meanwhile I have bought property no. 2 in 2000 and rented it out till I move in in 2003. I subsequently make property 2 as my main resident.

My questions are:
If I sell property no. 1 will the exemption apply for 6 yrs after I move out?

How would this impact on property no 2 if I decide to sell it later, noting the first three years are rented out?

thanks in advance.

Regards
Chin.

 

1. It could only be partially exempt as 6 years would have been around 2009 - which is more than 10 years ago

Tax Tip 109: CGT and Being absent from the main residence for more than 6 years Tax Tip 109: CGT and Being absent from the main residence for more than 6 years


2. You would need to apportion the main residence exemption on property 2, so it could never be exempt either.
any overlapping period could not count both - it is one or the other.

It would pay to do some calculations and see which strategy would be best

 

Thanks Terry!

 

Hi Terry,
If I may ask another questions.
If an IP is demolished and rebuilt with a new house can the cost to rebuilt be off set as cost incurred when calculating CGT when it is sold later?
Thanks again in advance.

 

That needs a new tip to explain

 

Thanks. Let me know if there’s a link to the top or when u have put it up.


Can I ask one more question, i intend to buy another property (no. 3) and expect this will be again rented out before I move from my primary home no. 2.
I plan to move into it in maybe 8-10years time (which will then be made my prime residence) as I want to keep property no. 2 and rent it out.

How does CGT apply when I sell either property no. 2 or 3 ?

again thanks in advance for you guidance.

 

You will need to get specific tax advice.
basically if you move into an investment property the CGT will be apportioned based on time
if you move out of a main residence and rent it the CGT will be worked out on the value at first income producing.

 

ok will do
But Would the 6 years exemption apply?

 

It might

 

Thanks again.

 

Terry, is CGT worked out on the value *at first producing income, or *at first available for rent?

 

INCOME TAX ASSESSMENT ACT 1997 - SECT 118.192 Special rule for first use to produce income