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

It may be difficult.
1. Your family must also move in (in full)
2. It must be your MAIN residence and be fully occupied (ie all possessions?). The ATO would argue your overseas abode is your MAIN residence esp if it has your majority of possessions.
Hard to see how you could fully occupy.

 

Yes you are right. I spoke to my accountant who gave me a very detailed response.

I need to become a resident for tax purposes first, which means either staying there for 6+ months or else having a paid job while there so that it is clear that I am a resident for tax purposes.

Also needing all bills and electoral roll using this new address.

Also if you don't sell the property after 6 years, you can move back in as a resident living there again (there is no limit yet how many times you can do this, but this rule may change in the future and mess it all up), but more importantly if not selling within 6 years (and not moving back in within 6 years) the rule no longer applies.

 

I can tell you what I did when I moved into my main residence:
- Rates in my name at that address.
- Electricity, water and gas in my name at that address.
- Updated electoral roll to that address.
- Updated drivers licence to that address.
- Updated vehicle registration to that address.
- Bills and bank statements to that address.
- Of course I moved all of my belongings into the house.
- OO loan.
- Home and contents insurance at that address in my name.

Then I kept documentary evidence of all of the above and filed it in a A4 lever arch file. It's probably still kicking around somewhere. I kept it all in case the ATO ever asked me to demonstrate it was my main residence.

 

There is no 6 month requirement. There is no minimum period BUT the key issue revolves around intention on the day you fully occupy that it is to become your main residence and you full occupy. The longer the easier it is to address. However I did have a client who moved in and the next day was ordered to redeploy interstate (army). He wasnt happy but we kept a copy of the orders to show he head a basis for the short stay (a few nights) and he had no idea.

And a person doesnt need to be a tax resident (strangely !) However they must satisfy the occupancy issue. So someone here on a 2 year work stay can buy a place subject to FIRB limits, leave after a while and in theory sell within 6 years and pay no tax. (NSW and Vic land taxes may affect them) If I was a betting man I would argue this could go in the budget.

A person need not be employed or can pay $0 tax and the main residence exemption applies.

The electoral roll, license and other details just assist to demonstrate occupancy but its all subjective stuff. The shorter the period the more the occupancy may be explored. I argue one of the best signs of a main residence exemption is pics from a housewarming party, bills for utilities and removal costs.

refer to the above item in bold...Not quite true. A maximum period of 6 years remains available. After 6 years an apportioning to give a max of 6 years based on time would apply. You dont lose the 6 years however.

 

yea there is no 6 month requirement, but since I reside overseas, I would need to become a resident for tax purposes first, which I can do either by staying for more than 183 days of the year, or have my domicile in Australia (which it is not) unless ATO is satisfied that my permanent place of abode is outside Australia, which if I spent the previous few years outside, came back for a month or two, then left again, really can't possibly hold up.

and yes a person can be unemployed and pay no tax but be a resident, but since, as described above, I have been a non-resident for a long time, and will be after just a month or two over there, being a resident is an issue for me that I can only get around by either staying there 6+ mo or paying tax there, or, well, living there for long enough to be considered a resident by any other means, which is vague but if it is ever investigated will never stand up if I come back for 1-2 months.

thanks for the response regarding the 6 years remaining available. I would look into it if this part further if this was an option for me.

 

This is not necessarily the case.

 

You only need to be temporarily resident in Australia to make the place your main residence. The key issue remains that the place is your main residence. If a guy called Donny Trump was to fly here on his jet and stay a few weeks buy a home and seek to claim the 6 year absence rule when he leaves it wouldnt work - He ordinarily resides in USA and has a US domicile. His main residence isnt here for those few weeks. So since he gets no main residence CGT exemption all the gain would be fully taxed as he is not a AU tax resident. And pay land tax and in NSW / Vic the land tax surcharge on top and or the absentee rates in other states.

 

Hi terry,

Thanks for your great tips. Can you confirm if you were to live in the property first as you main residence then rent it out. Does your bank loan have to be set up as OO or can it still be set up as an investment loan?

 

It could be either.

 

I believe intention will come into it. When you buy a home the loan would be be a home loan not investment & also your solicitor/conveyancer will do things different when your intending to live there or if it is to be an investment.

Do you want an argument with the tax office ? So only claim it if it was in *fact* your home.

 

I don't see how Intention is relevant. A property either is or is not a main residence - a question of fact.

 

Hi Terry,

Mar 2009 = purchase with first home buyer grant, rent it to existing tenant for 8 months, then moved in

Dec 2016 = rent it.
Dec 2020 = move in again.

Can 6 year rule apply?

 

But who decides the facts if your position is not solid or clear ?

The tax office themselves talk about intentions.

"A mere intention to construct or occupy a dwelling as your main residence – without actually doing so – is not sufficient to obtain the exemption."

 

Yes

But that doesn't mean it is fully exempt because it cannot apply until after you have lived in it.

 

Either you live there as the main residence or not. If it is a grey area it will come down to evidence - evidence that you did live there and no where else.

Intention is not enough.

 

Thank you very much, Terry.
So it needs to proportion out 8 months when I first rent out?

 

Yes

see
Tax Tip 86: Don’t be so fearful of generating income from the main residence https://propertychat.com.au/communi...nerating-income-from-the-main-residence.6302/

 

Intention can be a factor to lengthen the exemption where a new residence is constructed. BUT the original intention must be satisfied with actual residency later.

 

Sorry to resurrect an old thread, but new to all this and tbh bit clueless initially.
We have the following situation:
Bought Sydney property 2005 lived there until 2010.
Moved to Brisbane for work, Sydney property is being rented. Renting in Brisbane from 2010-2011.
Mid 2011, bought property in Brisbane, moved straight in.
Sold property in Brisbane in Dec 2014 then renting again.
Did not declare the sale of the Brisbane property in our tax return in 2015 as we made a loss on did not think we had to declare it.
Now we have just sold the property in Sydney in 2017 and has capital gain.

Question is:
1. since we have not declared the sale of the property in Brisbane, can we now amend our tax return in 2015 and claimed that it was an IP instead of PPOR? eventhough we did not produce income from it
2. If we can, then we are thinking of claiming the 6 year exemption rule for the property in Sydney. I know it is 7 years since we left the property in Sydney, but we still can claim 6 years out of 7 right?

Thank you so much in advance all property and investment guru.

 

What, so you want advice for lying on your return ?.... lol..... classic.