BEAN THINKING: MAIN RESIDENCE
For many people, the most significant asset a person will possess is their own home. From an income tax perspective your home is known as a main residence.
It is widely known that any profit from the sale of a main residence is exempt from capital gains tax.
However, there are some rules to ensure that your main residence remains tax-free. Even more interesting, is that you are not required to live in your home at all times during ownership.
Here are some essential facts to be aware of
- The main residence exemption is only available to individuals.
- The individual/s must have an ownership interest in the property.
- A main residence includes adjacent land that the dwelling is situated on up to a 2 hectare limit. (As long as the land is primarily for domestic or private purposes.)
- Vacant land can be nominated as your main residence for up to 4 years. This is only available if:
- You build or renovate a dwelling on the land
- Move into the dwelling as soon as practicable after completion
- Live in the dwelling for at least 3 months after it becomes your main residence
- You can only nominate one property as your main residence at any given time. (Except for a 6 month period if moving premises.)
- You can be absent from your main residence and still be eligible for the exemption.
There may be occasions where you are required to temporarily live elsewhere, such as for work or to be closer to family, but do not want to sell your home.
In these situations, your home can still be classed as a main residence for tax purposes. To do so, a few key criteria should be followed:
- You cannot nominate another property as your main residence.
- You can rent the property while absent but restricted to a period of 6 years.
- The property will remain your main residence indefinitely if not rented.
Generally, most people will qualify for the main residence exemption when selling their homes. However, it is important to be aware that it is just an exemption and not an automatic exclusion.
If you would like more information, please contact Bill Charlton or Lauren Steinheuer on 07 3210 5500. We are more than happy to discuss these matters with you in more detail.