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

1. Yes. Provided you do not reside in another property one of you own and also seek to claim exemption on that property.
INCOME TAX ASSESSMENT ACT 1997 - SECT 118.145 Absences

2. No. Some of those costs are not deductible in any event. Some deductibles such as council rates would be effctively deductible from the date of making the property available to rent. A tenancy agreement may be a indicator of that. For costs like rates etc if you take the annual cost and pro-rata for the numbers of days it will be a guide.

3. There is no such requirement. The issue is one of fact. 1. Move in and then 2. You are absent. There are people who undertake this process deliberately and it is not a tax scheme to use a tax law. People who make light efforts to fully occupy then claim to be absent are a threat the ATO are aware of and would seek evidence from if audited. A year poses no issue.

 

Thank you Terry for the quick reply..
Yes, I was surprised that I got different answers as they all are qualified accountants...

I live in Sydney, will you or an accountant you recommend to assist my case?

Thank you in advance!

chc19

 

I'm with Terry on this. The absence rule applies when a whole absence exists. A pro-rata situation applies when you earn income from a property that is also a main residence. One (good or bad ??) thing however is that s118-192 can never apply if you move out and rent the whole property. You are permanently caught with a costbase of the actual costs. You must use a pro-rata CGT method. You coudl use the 6 year rule however it would only be in respect of the exempt use which is now absent ie : 33.33%

Did any of the three explain about this issue ? A valuation CANNOT be used. The 6 year absence can be used but only for 33.33% and you will have to use a pro-rata basis when selling and cant draw a line in the sand with s118-192 (The Special Rule).

 

Thank you so much Paul.
No, none of them explained that well. I think this is the first time they see this scenario...
I read your comments few times but I still do not really understand this part...not a tax expert... Could you please explain a bit more?
The 6 year absence can be used but only for 33.33% and you will have to use a pro-rata basis when selling and cant draw a line in the sand with s118-192 (The Special Rule).

Do you mean that
1. use pro-rata basis to calculate CGT first
2. apply 6 year rule to exempt 66.67% (only live 1 room) from July 2010-Feb 2014.

will it make any deference if i move back before sell?

Thank you in advance!!

chc19

 

I dont provide personal advice and tax services to PC posts.

I would recommend you seek personal tax advice and assistance with ensuring you minimise both CGT and errors. I hope that this thread has helped define the scope of the issue.

Tip : If you are pro-rata for the CGT calc the issue of moving back just affects the numbers of exempt days before you sell. The days already owned are set in stone. As a % the final days, week or months may be immaterial to the % exempt issue.

 

Thank you very much Paul

 

Sorry for bringing up an old thread but I was not on PC when this thread was made.

So if I currently live overseas (as a non-resident but Australian citizen), could I live in my property in NSW for just 1 month and then leave again and this rule would apply to me?

 

The rule could apply if you are overseas. It can also apply to overseas property.

 

Oh my question is specifically if I stay for such a short time as 1 month.

There must be some sort of reasonable amount of time. I wouldn't expect 3 days to be eligible. How would someone go about getting a minimum when no minimum was stated?

 

Intention.

 

the legislation doesn't specify a minimum time. Either the property is your main residence or not.

3 days could be enough in some situations, but 3 months may not be enough in other situations.

 

Nothing to do with it!

it is a question of fact, not motive, in this instance.

 

How would one go about finding what situation confirms the property is my main residence and the minimum time required to meet this?

 

Private ruling

 

But first start off with the dictionary definitions of 'main'. If you have all your possessions there and no other property it may well be your main residence.

 

I am not sure about "this instance" but intention has to matter ?

 

Not sure how it could matter.

If you intend to move into a property but don't it cannot be your main residence.

If you move into a main residence but only temporarily and then move out then it could still be classed as your main residence even if your intention was to live there a short time.

If some tax bandits kidnapped a person and held them in a property they owned against their will it could be classed as their main residence even though they had no intention of living there.

 

Hmm I don't think I can possibly make this work.
Apartment bought and rented for 1.5 years.
I stay for 1 month.
Then it is rented out again for the next 6 years.

Don't think that can be considered a main residence if it ever comes under scrutiny. Or would it be worth a try in case it is never really checked

 

It could only be your main residence after you have actually moved it. So it may not qualify for the first period of 1.5 years but it could for the next 6 years.

 

I see what your saying.

What I am saying is your intention to be your home actually has to become your home, not something you pretend is your home.....

As you say, facts are just that.