ATO’s ‘Main Residence Exemption Tips’
The main residence exemption needs to be considered in a variety of situations when a taxpayer disposes of their dwelling. The ATO has been seeing issues with non-reporting of a capital gain, loss or main residence exemption for property sales.
The ATO hopes that the following tips will help in this regard:
– Taxpayers should consider if they have started earning income from their home. They may need to get a market valuation for CGT purposes, particularly if they are renting out some or all of their home, and/or running a business from it.
– When renting out a property that was their main residence, taxpayers need to consider whether to use the 6-year absence rule when they sell their property. If they choose to use the 6-year absence rule, they should make this election in their return by including the main residence exemption in the CGT section.
– Tax agents should not ignore prompts in their software advising that a client has transferred property. Details of property transfers are available in Online services for agents, including the property address, contract date, settlement date and sale price.
– Taxpayers can only have one property as their main residence at a time. The only exception is the 6-month period when they move from one home to another.
– If a taxpayer’s tax residency in Australia has changed during the year, their CGT obligations may also have changed.
For more examples and scenarios regarding the main residence exemption, taxpayers can refer to the ATO’s fact sheet ‘CGT and the main residence exemption’.
