Two spouses, two main residences

Hi All,

Is it possible to have:

Property A: owned solely by spouse 1
Property B: owned solely by spouse 2

Both spouses live separately in their main residence.

Both spouses claim individual main residence exemptions on sale of asset.

 

Do you have 2 spouses? That is what I thought when seeing the heading.

Yes it could be possible for each spouse to claim a full or partial exemption - depending on the circumstances such as being separated or not. Seek proper tax advice.

 

What if they were still together and both utilising the 6 month/ 6 year rule whilst living together in an entirely different residence to property A and B.

 

It's entirely possible to have to Owner Occupied residences, I've just done an application for an existing client who has one Owner Occupied residence on the Gold Coast the other was purchased in Brisbane for the clients to stay in when working in Brisbane City (about 3 days of the week)
Not sure how this is treated by the ATO in regard to CGT when time comes to sell one

 

Lol well you should if you are advising clients

 

If you are talking tax, spouses can only have one residence between them that could be exempt.

 

I think Lindsay as a broker, so no need to know about the CGT treatment of a property when sold. Clients would need to seek their own advice on this.

 

The OP lives in a very open relationship with the spouses running two separate households. (Either that or the spouses don't know about each other).

 

He must have headaches

 

If both spouses live in seperate homes the main residence exemption is apportioned.

there is the obvious 6 month overlap when selling and moving: long term one family has one main residence among the family.

this can become a significant issue in matrimonial cases. The family lawyer will often draft orders identify when, who and how the tax concession was enjoyed.

 

No. Not normally. However there can be circumstances when it does apply eg

Dave is single and has owned a house that he lives in for 4 years. He meets Mabel and they date a while and dont live together for 12mths. Then they live together at Mabels home.

Dave can treat his residence as his main residence for the initial 5 years providing it was never used to produce income in that time. Thereafter its more complex.

• s118-170 says only ONE dwelling can be exempt for the period once they reside together as spouses (yes even unmarried or same sex couples) OR they can choose both dwellings as exempt but the exemption is just 50% each. Not 80% v 20% etc.
• The absence rule is permitted subject to s118-170 eg Dave cant be absent for more than 6 years
• Land tax is a further consideration. It is far more harsh. It would mean Dave would lose the concession for his home based on the fact he no onger uses the home as his principal place of residence.
• Non-residency and many other factors can impact
• Divorce may impact a main residence concession too. Eg Dave and Mable divorce. The court awards Mabel Dave's home as part of a settlement. She never resided in it so it wont be 100% exempt for her later sale. s118-178 looks at how a property was used by BOTH spouses while they were together too. Since her ex lived there is could be 50% exempt for some period.
• Dave and Mable could double dip if they wished. Its how they elect to teat the gains. eg Dave sells his former home soon after moving in with Mabel. That gain may be fully exempt. Mabels property may still be worth what she paid. Hence thee is no further CGT issue for her either. From the time Dave's has sold Mabel may treat the property as 100% exempt. She can then consider the NSW duty concession to transfer 50% to Dave and as there is no taxable gain it poses no concern.
• s118-192 resets a costbase and this can affect a CGT asset that was a home but is rented

Generally we recommend that the first property sold be CONSIDERED for the exemption and numbers are worked through. However in this case its also possible that the first sold is not treated as exempt as a better outcome may arise from making a different choice. The MRE is a choice. Taxpayers may elect not to claim a CGT loss as exempt for example.

Generally however Dave and Mable cant both sell their former homes a daty after they commence to be spouses and both get a full exemption. If they have dependant kids its even more complex. Splitting is NOT allowed and only one residence for the family can be used at any point in time. eg Their uni age kid moves to Daves former home.

 

I cannot legally advise on tax matters - all my clients get independent advice regarding such matters

 

There is also a double dip for spouses. More common for wealthy families. Like the late Kerry packer and his Bellevue Hill compound. Its on multiple titles with a exterior fence.

Dave buys 12 Main Street. Mabel buys 14 Main Street. They apply to council to build a new house which will only be on Dave's lot. Mabels lot will contain a pool and tennis court.

All of it is CGT exempt if the whole site is used for the main residence. And both are exempt for NSW land tax.
They have potentially three CGT assets. A "main residence" can include multiple legal titles provided the use test is met.

Dave and Mabel could later buy 16 Main Street and re-fence and use that dwelling for the adult kids at uni.