The capital gains tax (CGT) exemption for a person’s primary residence is often overlooked as a contributing factor to Australia’s housing affordability crisis. However, when combined with various concessions, this exemption can prove to be highly valuable. In this article, we will explore some of the key concessions available and how they can be utilised to access the CGT main residence exemption.

 

Concessions for changing houses

One important concession is applicable when purchasing a new home before selling the old one. This allows individuals to consider both properties as their CGT-exempt homes for up to six months while they sell the old property. However, specific conditions must be met to qualify for this concession.

 

Concession for moving into a house

Another valuable concession permits individuals to treat their new home as their main residence for the entire duration of ownership, even if they haven’t moved in immediately. It is important to note that this concession has limits and restrictions, generally requiring individuals to move in “as soon as it is practicable.”

 

The absence concession

The absence concession is an exceptionally useful provision that enables homeowners to retain the CGT exemption on their property, even during extended periods of non-residency. If the property is rented during the absence, the concession lasts for six years. If it remains unrented, the concession can last indefinitely. However, strict conditions must be satisfied, including the genuine use of the property as a primary residence.

 

Building or renovation concession

This concession allows individuals to treat vacant land as their CGT-exempt home for up to four years if they build a new home on it and move in within three months of completion. The concession also applies when major renovations are carried out on an existing home or in a knock-down and rebuild scenario.

 

Utilising concessions to maximise benefits

These concessions, along with others not mentioned here, can be highly advantageous depending on an individual’s specific circumstances. They can enable homeowners to access a full or partial CGT main residence exemption in ways that may not have been initially envisioned. For instance, the absence concession allows individuals to negatively gear their property during the period of non-residency if it is rented out.

 

Partial CGT exemption and limiting factors

It is crucial to be aware of certain CGT rules that may result in a partial exemption or limit the ability to claim the exemption. For example, spouses cannot each claim a CGT exempt main residence for different properties during the same period. Additionally, subdividing and selling a portion of the property may impact the eligibility for the CGT exemption.

 

Seeking professional advice

If you are considering buying or selling a home or believe that you may benefit from any of these concessions, it is advisable to consult with professionals who can provide tailored advice based on your circumstances. They can guide you on the applicability of these concessions and help you utilise them effectively.

 

Conclusion

The CGT main residence exemption concessions, when properly understood and utilised, can offer significant benefits for homeowners in Australia. By taking advantage of these concessions, individuals can maximise their CGT exemptions and navigate the complexities of taxation laws. Seek professional advice to ensure you make informed decisions regarding these concessions when buying, selling, or considering changes to your primary residence.

Contact our team at Regency Partners for more information and assistance in harnessing the benefits of CGT main residence exemption concessions.