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Will I Pay CGT? Our question of the month

As accountants and business advisors we get asked many ‘quick’ questions. Whilst the question may be quick the answer may be not!

Our question of the month is; Will I Pay CGT?

Question of the month:

Hi, we bought our house in 2016 and lived there for 4 years. We then purchased another property and moved into it. We were able to hold the first property and rent it out for another 2 years. As the property market has been strong with excellent capital gains, we decided to sell the first property. I don’t want to pay any CGT as this was my main residence. Can you advise me please?


Well Robyn, the answer is straight forward, but there are some twists. As this was your main residence and never rented until after you moved out you are required to obtain a property valuation as at the date you vacated the home. This could be done when you moved or do it now as a retrospective valuation. I recommend you get a licensed real estate valuer to do this as you need to be solid on the valuation.

You will pay capital gain on the increase in this value up to the date of sale as per the contract. As you rented the property after you moved out you have already claimed all the holding expenses so you cannot claim again. You will be eligible for the 50% general discount (reduction) on the gain from when you moved out until sold.

Another way of reporting this is to nominate your first property as continuing to be your main residence up until you sell. But this exposes your second property to CGT as it is not treated as your main residence when you have nominated the first property. This will be an interesting calculation in 25 years when you sell and is not commonly used.

As an aside, if you moved out of the first property and rented elsewhere you can nominate the first property as continuing to be your main residence for up to 6 years.

By the way, if you rent part of your residence out for Airbnb, then part of your residence is no longer exempt from CGT. As the ATO has a data base of information from Airbnb, this will be an interesting conversation when you sell your home.

As every situation is different I would suggest speaking to your Client Manager at Sullivan Dewing if you have specific questions.

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