FAQ 105 How does a property qualify as a PPR?
PLEASE READ THE EXPLANATION BELOW. IF YOU ARE UNSURE THEN DISCUSS YOUR EXACT CIRCUMSTANCES WITH YOUR ACCOUNTANT. REMEMBER TO OBTAIN AND MAINTAIN GOOD RECORDS.
In general, your main residence (your home) is exempt from capital gains tax (CGT).
What factors apply?
The following factors may be relevant in working out whether a dwelling is your main residence:
1) The length of time you live there – there is no minimum time a person has to live in a home before it is considered to be their main residence
2) Whether you and your family lives there.
3) Whether you have moved your personal belongings into the home.
4) If this is the address to which your mail is delivered.
5) If this is the address registered on the electoral roll.
6) If you have a connection of services (for example, phone, gas or electricity) in your name.
7) If it is your intention in occupying the dwelling.
Note that a mere intention to construct or occupy a dwelling as your main residence – without actually doing so – is not sufficient to obtain the exemption.
What is a dwelling?
A dwelling is anything that is used wholly or mainly for residential accommodation. Examples of a dwelling are:
a home or cottage
an apartment or flat
a strata title unit
a unit in a retirement village
a caravan, houseboat or other mobile home.
Main residence for only part of the time you owned it
If a CGT event happens to a dwelling you acquired on or after 20 September 1985, and that dwelling was not your main residence for the whole time you owned it, you get only a partial exemption.
If a dwelling was not your main residence for the whole time you owned it, some special rules may entitle you to a full exemption or to extend the partial exemption you would otherwise obtain. These rules apply to land or a dwelling if:
1) you choose to treat the dwelling as your main residence, even though you no longer live in it
2) you moved into the dwelling as soon as practicable after its purchase
3) you are changing main residences
4) you are yet to live in the dwelling but will do so as soon as practicable after it is constructed, repaired or renovated and you will continue to live in it for at least three months
5) you sell vacant land after your main residence is accidentally destroyed
6) part of your main residence, such as adjacent land or structures, are compulsorily acquired.
Calculating a partial exemption
The part of the capital gain that is taxable is calculated as follows:
Total capital gain made from the CGT event x number of days in your ownership period
when the dwelling was not your main residence divided by the total number of days in
your ownership period.
Example:
Total Capital Gain over the whole period of overship = $500k
Total number of days owned = 7000 days
Total number of days not a main residence = 1000 days
Taxable portion = $500k x 1000/ 7000 $71,428
CGT Exemption > 12 months ownership = 50% of $71,428 $35,714
Tax would be paid at the recipients marginal rate on $35,714
Most of the above comes from the ATO website:
Follow this link for more detailed information.
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