All Topics / Legal & Accounting / Main Residence Exemption

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  • Profile photo of flowergirl13flowergirl13
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    @flowergirl13
    Join Date: 2013
    Post Count: 5

    Hello everyone!

    I am new to the forum and have been doing some research on the main residence exemption, but was wondering if anyone can help clarify…

    1. I purchased my first property in early 2011, and immediately moved in and lived in it for almost a year (first home owners grant..), so it became my principal place of residence.

    2. In 2012 I vacated, and moved back in with my parents. The property was rented out and is still currently being rented.

    I know of the 6 year absence rule, but was wondering, would I still be entitled to the full exemption given I moved back with my parents?

    Essentially I have opted to treat my property as my main residence for CGT purposes, but I would assume the onus is on me to proof that my parents place is NOT my main residence?

     Also, if I buy another property for investment purposes, will this affect the exemption at all? My understanding is, it wont impact it as long as it is purely an investment property..

    Thank you!

    Profile photo of HomeLoanExpertsHomeLoanExperts
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    @homeloanexperts
    Join Date: 2007
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    My understanding is that the 6 yr absence rule would still apply and that yes you can buy another property… as long as you don't move into it.

    That being said I'm not an accountant. Hopefully someone else here is and can confirm that for you.

    Profile photo of PLCPLC
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    @plc
    Join Date: 2012
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    Like above no expert, but from what I know you can still claim the property of your main residence even if you are physically living with your parents at their property.

    Likewise if you own other investments, as you can only claim one property as your main residence at any one time (which would be the first one in your case).

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
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    Melbourne based Mortgage Broker | Making Finance Simple

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
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    Agree with the others – however, also not an accountant so obtain advice specific to your situation.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Profile photo of CatalystCatalyst
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    @catalyst
    Join Date: 2008
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    It doesn't matter where you live. Its what you  own as your PPOR. You claim 1 residence as your PPOR. If you buy an investment property you can continue to claim the first as your PPOR. If you move into the investment property you can change that to your PPOR if you want. 

    You can rent it out for up to 6 years and not have to pay CGT. After that if you move back in then out again you can do it for another 6 years. 

    Profile photo of TerrywTerryw
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    @terryw
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    Do you own your parent's property?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of BlockeyBlockey
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    @blockey
    Join Date: 2013
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    Agree with the posts above. Appears to be ok but would suggest obtaining confirmation from an accountant (so you have legal recourse if the answer is wrong!).

    Profile photo of tanner892tanner892
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    @tanner892
    Join Date: 2013
    Post Count: 25
    Terryw wrote:
    Do you own your parent's property?

    Exactly, they own it not you (i would presume) it's their PPOR not yours.

    The exemption would apply.

    Profile photo of flowergirl13flowergirl13
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    @flowergirl13
    Join Date: 2013
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    Thanks all!

    No I dont own my parents property, I only own my first property where I lived in then started renting. and moved back to my parents.

    I guess for tax purposes, I have one PPOR and that is the property that is currently being rented out!! So as long as I sell within the 6 years, or I move back in, then I am exempt from CGT?

    I haven't spoken to an accountant yet, Im an accountant by trade but not a tax accountant ha ha!!!

    Profile photo of Rob G.Rob G.
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    @rob-g.
    Join Date: 2010
    Post Count: 70

    Doesn’t matter if you move into another dwelling you own.

    The s.118-145 election deems your vacated dwelling (and no other) to remain your exempt main residence for a certain time.

    HamishBlair
    Participant
    @hamishblair
    Join Date: 2013
    Post Count: 10

    Just to clarify in this example, is the interest on the current IP (former PPOR) is deductible (and the interest assessable) even though there is no CGT (during the 6 year exemption)?

    • This reply was modified 5 years, 6 months ago by  HamishBlair.
    Profile photo of TerrywTerryw
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    @terryw
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    yes, if it is rented out.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of James MavJames Mav
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    @jamesmav
    Join Date: 2014
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    Hi Flowergirl13,

    Yes that is correct, you may still claim your investment property as you main primary residence for up to six years after you move out (if you move back in you will get another six years).

    The only issue you must be aware of is the exemption doesn’t apply of you are living in your investment property AND rent out part of the property at the same time.

    Since this is not the case you will have no problems with capital gains upon sale as long as you can prove to ATO you have lived in the property in the first instance (ie bills under your name, postal address etc).

    Kind regards,

    James Mav – Accountant
    ______________________________
    http://www.accountancymatters.com.au

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