Unlocking the Benefits of CGT Main Residence Exemption Concessions

The capital gains tax (CGT) exemption for your main residence, combined with several useful concessions, can greatly influence your financial situation. These exemptions and concessions can help homeowners navigate the complexities of property ownership and potentially save a significant amount of money. Let’s explore some of the main concessions and how they work:

1. Changing Houses Concession:

  • If you buy a new home before selling your old one, you can treat both homes as CGT-exempt for up to six months.
  • Important conditions must be met to qualify for this concession, so it’s crucial to understand and adhere to these requirements.

2. Moving into a New Home Concession:

  • You can treat your new home as your main residence from the time you own it, even if you don’t move in right away.
  • You need to move in “as soon as practicable” and meet certain limits and restrictions.

Absence Concession:

  • This allows you to treat your home as CGT-exempt even if you’re not living in it.
  • If you rent it out, the exemption lasts for six years; if not rented, it lasts indefinitely.
  • The home must have been your genuine residence, and the ATO keeps track of these details.

Building or Renovation Concession:

  • You can treat vacant land as CGT-exempt for up to four years if you build a home and live in it for at least three months after completion.
  • This also applies if you leave your home for major renovations or a knock-down rebuild.

These concessions are highly useful based on individual circumstances and can help you access a full or partial CGT exemption in ways you might not have considered. For instance, the absence concession allows you to negatively gear your property during the six-year rental period.

However, some CGT rules can result in a partial exemption for your home:

  • Spouse Rule: Spouses (including de-facto spouse and same sex spouses) cannot each have a separate CGT-exempt main residence simultaneously. This rule is in the tax law, although not always actively enforced by the ATO.
  • Subdivision Rule: If you subdivide and sell part of your property (like a large backyard), you might face CGT implications. This is highly relevant in the current housing market -with especially giving more flexible council regulations.

Understanding these exemptions and concessions can help you navigate the housing market more effectively and make the most of your financial resources.

If you need assistance with understanding or applying these CGT concessions, feel free to contact us at W Wen & Co. Call us at 02 9871 3429.

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