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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

    18th Jun, 2015
    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. also describes situation where spouses or families live in different homes. Again, they may have to choose OR may have no choice at all.