Noel Whittaker's Blog Capital gains tax on the family home has always been a confusing topic. For starters, your home is exempt from capital gains tax (CGT) provided it is in the name of the homeowners personally, and not in the name of the family trust or a company. Also, you can be absent from your home, and rent it out, for up to six years without losing the CGT exemption. If it is not earning income the period of time you can be absent is infinite, you just have to have lived there first.
It’s also possible to rent out your residence while occupying another one as your residence – there is no need to declare which one is your principal place of residence until you decide to sell one.
It’s becoming common for people to buy a home as their residence to get the various concessions that go with homeownership, and then rent the house after a fairly short period of occupancy. They then return to it within six years to get the benefit of the CGT exemption.
This begs the question of what you need to do to satisfy the definition of occupancy.
There is no simple answer – each case depends on your individual circumstances. But factors taken into account by the tax office include the time you’ve lived in the property, the place of residence of your family, whether you have moved your personal belongings into the property, the address to which your mail is delivered, your address on the electoral roll and connections of services such as telephone gas and electricity. In short, you need to be living in the property as a permanent resident.
As you can see, it’s important that anybody who may have a potential capital gains tax liability on their residence, or who are taking steps to make sure they don’t get a bill from the tax office, consult with their accountant before any steps are taken. It’s too late to rewrite history once the deed is done.