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Two singles owning property - Double dip CGT ??

Discussion in 'Accounting & Tax' started by Paul@PFI, 26th Oct, 2015.

  1. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,363
    Location:
    Sydney
    I often encounter two "singles" who meet and each own property. They the choose to live in one or other. Question is asked - We BOTH get the CGT main residence exemption ?? After all we each own a property.

    Simple answer is NO. This is a great example of where the main residence exemption does not have to apply to a property you own. One of the key issues is where you live or choose to live.

    The individuals must make a choice. EITHER property may satisfy the MRE for at least 6 years but at some point of time ONLY ONE main residence exemption may be claimed during the period they are a defacto / married etc couple. The 6 year rule will NOT operate when they live together. They can choose what that is by making an election - ie a choice when they later lodge tax returns. They can :
    - Treat one eligible property as if it owned by both of them and the owner can claim a full 100% MRE for that period of time ; or
    - Treat each property as if it was eligible for a 50% exemption based on the MRE for that period of time.

    Word of warning about land tax. In NSW a similiar rule applies. You cant live in your partners home and claim a exemption on your former home if they also claim a exemption. But unlike CGT you may not be able to claim 50% either. The current home may be exempt and the former home fully taxable.

    https://www.ato.gov.au/General/Capi...-or-children-live-in-a-different-home-to-you/ also describes situation where spouses or families live in different homes. Again, they may have to choose OR may have no choice at all.