Hi Guys,

what are the tax implications of owning a property that you once lived in for a brief time but now have rented out. Owned property for 10 yrs 1st year lived in, rented out since.

The property was the only one under your name.

As this was the only property i owned would this be classified as my primary residence? Even though i could not live there (say i couldnt afford to do so) and thus had to rent the property out.

Any help appreciated.

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I'm a jockey kunts...

https://www.ato.gov.au/General/Capit...ing-your-home/

Does this help?

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Bush chook enthusiast

Its a bit convoluted.

My scencario. Bought house lived in 1yr. Rented for 9yrs.

Only dwelling in my name, lived at home for the rest.


How does the CGT apply?

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I'm a jockey kunts...

I think you'll have to pay cgt based on this bit from the ato website. 9 yrs > 6 yrs. Best to speak to a tax accountant though.

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^ as above must be treated as your main residence every 6 years if rented out, or you will be caught by cgt. I can find the act that this is caught by if needed.

so cgt only applies after the 6th year..

i.e purchased 2004, rented 2005-2014 (CGT exempt from 2005-2011) then CGT taxed from 2011-2014?

If so how can they work out the CGT of the value of the property increase from those years that it is not exempt?

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I'm a jockey kunts...

Well from my understanding. The property cannot be exempt from cgt at all, as it ceased being your main residence for 6 + years, while you have used it to produce income. section 118-45(2) core tax legislation.

however, for example if you did use it as main residence every 6 year period, you would be able to claim. you would work it out by capital loss/gain X non-main residence years/days in your ownership period. section 118-185(1) (2) core tax legislation.

However, I would seek advice from a qualified professional, as I'm not a qualified in this area as of yet . Hope this helps at all.

The way I understand it, they don't pro rata cgt.
So don't think of it as cgt applies after the 6th year, it's more that you pay cgt on the entire amount if it's rented out for more than 6 years in a row...

See example from ATO site:

Example

Home ceases to be the main residence and is used to produce income for more than six years during a single period of absence

1 July 1993
Ian settled a contract to buy a home in Sydney on 0.9 hectares of land and used it as his main residence.

1 January 1995
Ian was posted, by his employer, to Brisbane and settled a contract to buy another home there.

1 January 1995 to 31 December 1999
Ian rented out his Sydney home during the period he was posted to Brisbane.

31 December 1999
Ian settled a contract to sell his Brisbane home and the tenant in his Sydney home left. Ian chose not to claim the main residence exemption on the sale of the Brisbane property, so he had to include the capital gain in his return for that year.

The period of five years from 1995 to 1999 is the first period the Sydney home was used to produce income for the purpose of the six-year test.

1 January 2000
Ian was posted by his employer from Brisbane to Melbourne for three years and settled a contract to buy a home in Melbourne. He did not return to his Sydney home at this time.

1 March 2000
Ian again rented out his Sydney home – this time for two years.

28 February 2002
The tenant of his Sydney home left.

The period of two years from 2000 to 2002 is the second period the Sydney home was used to produce income under the six-year test.

31 December 2002
Ian sold his home in Melbourne. Ian chose not to claim the main residence exemption on the sale of this property.

31 December 2003
Ian returned to his home in Sydney and it again became his main residence.

28 February 2014
Ian settled a contract to sell his Sydney home.

As Ian did not claim the main residence exemption for either of his Brisbane or Melbourne homes he is able to choose to treat the Sydney home as his main residence for the period after he stopped living in it. Ian claims the exemption for this property.

Ian cannot obtain the main residence exemption for the whole period of ownership of the Sydney home because the combined periods it was used to produce income (1 January 1995 to 31 December 1999 and 1 March 2000 to 28 February 2002) total more than six years.

As a result, the Sydney house is not exempt for the period it was used to produce income that exceeds the six-year period – that is, one year.

If the capital gain on the disposal of the Sydney home is $250,000, the amount of the gain that is taxable is calculated as follows:

Period of ownership of the Sydney home:

1 July 1993 to 28 February 2014


7,548 days

Periods the Sydney home was used to produce income after Ian ceased living in it:

1 January 1995 to 31 December 1999


1,826 days

1 March 2000 to 28 February 2002


730 days




2,556 days

First six years the Sydney home was used to produce income:

1 January 1995 to 31 December 1999


1,826 days

1 March 2000 to 28 February 2001


365 days




2,191 days

Income-producing period exceeding six years after Ian ceased living in it:

2,556 – 2,191 = 365 days

Proportion of capital gain taxable in 2012–13

$250,000 X


365
7,548


= $12,089

Because Ian entered into the contract to acquire the house before 11.45am (by legal time in the ACT) on 21 September 1999 and entered into the contract to sell it after that time, and owned it for at least 12 months, he can use either the indexation or the discount method to calculate his capital gain.

Note: 21 August 1996 importance
The home first used to produce income rule does not apply because the home was used by Ian to produce income before 21 August 1996.

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[COLOR=Black]Liberty GT Spec B tuned 240 HP & 372 Nm at the hubs.[/COLOR] "Instead of banning high performance cars - ban low performance drivers"

Tino - speak to an accountant.

If you claimed the maintenance, interest, repairs, cost of ownership etc against income produced then the 6 years CGT exemption may not apply.

If you made no income as the house remained empty the the 6 year period can be expanded to indefinitely.

It is very dependent on how you treated the income and expenses of the propoert in the preceding years.

Did you get a valuation at the end of the 6 years period? If not then you may be over/under paying CGT if using an averaged capital growth etc. Further, did you depreciate the house as an asset during rental period etc?

Again, PLEASE speak to an accountant specialising in this area.

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[COLOR=Black]Liberty GT Spec B tuned 240 HP & 372 Nm at the hubs.[/COLOR] "Instead of banning high performance cars - ban low performance drivers"