How long must I live in a property before it’s exempt from capital gains tax (CGT)?

I bought a large block of land 50/50 with a friend which we are subdividing into two lots. We're building two separate homes on the land, one for each of us. By the time the houses are finished and the land subdivided, it will be 12 months or so since we settled on the original block of land. If I sell my house and settle when the land is subdivided, do I qualify for the 50% reduction in capital gains tax? If I don’t sell the house then, how long would I have to live in it before it would be exempt from capital gains tax?

Answer: Typically the 12 month period starts when you’ve acquired the asset. If you’ve owned the asset for a period of more than 12 months, you may be eligible for a 50% discount. If upon the completion of property you moved in as soon as practicable, then you can nominate the dwelling as your main residence (MR) when acquired – the condition is that no other property is nominated as your MR. This generally means it will be exempt from CGT. You can use your main residence to generate income for a period of up to six years before it becomes liable for CGT. If another property is selected to be your main residence, your other property will accrue capital gains. For a more detailed discussion of your circumstances, please contact The Property Tax Specialists today. For more advice on property investment issues, check out our property investment hub. DISCLAIMER: Readers should not act on the information above without obtaining professional advice relevant to their circumstances. It is intended as information only.

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8 Responses

  1. Default Gravatar
    SamJuly 16, 2018

    I have a unit which I purchased in 2008 and lived in for 2 years then have had it rented out till now.
    Would moving in for 6 months be beneficial at all to the amount of CGT I will have to pay and would moving back in for 12 months completely negate having to pay any CGT?
    Thanks!

    • finder Customer Care
      JeniJuly 23, 2018Staff

      Hi Sam,

      Thank you for getting in touch with finder.

      Since upon the completion of property you moved in, then you can nominate the dwelling as your main residence (MR) when acquired – the condition is that no other property is nominated as your MR. This generally means it will be exempt from CGT. As you mentioned, it was rented it for a while, you may need to pay tax only on the time when the property was used as an investment. Moving forward, you may want to speak to a property tax specialist or contact the ATO regarding this matter.

      You may also want to utilise the capital gains tax property exemption tool on this page.

      I hope this helps.

      Please feel free to reach out to us if you have any other enquiries.

      Thank you and have a wonderful day!

      Cheers,
      Jeni

  2. Default Gravatar
    NhApril 25, 2018

    I planned to sell my house after living in it one year. I was told I won’t have to pay CGT after one year, now I’ve read it’s two years. I am selling because I can no longer afford to live in the area. Rates are high, Drs don’t bulk bill and as it’s a tourist town everything’s unaffordable. Will I have to pay CGT? I’m counting on the profit to buy a house in a cheaper area.

  3. Default Gravatar
    CherieJanuary 12, 2018

    I lived in my house for 9 yrs, have rented it out for 9yrs, if I go back and live in it again can I avoid capital gains tax if I live in it for a certain length of time?

    • finder Customer Care
      HaroldJanuary 12, 2018Staff

      Hi Cherie,

      Thank you for your inquiry.

      As per checking you can use your main residence to generate income for a period of up to six years before it becomes liable for CGT. Since you have rented it for 9 years may need to pay tax only on the 9 years when the property was used as an investment. Moving forward, you may want to speak to a property tax specialist or contact the ATO regarding this matter.

      I hope this information has helped.

      Cheers,
      Harold

  4. Default Gravatar
    PaulJanuary 12, 2016

    We purchased a block of land two years ago and have since built a new house on it with the intention of moving in and making it our main residence. The house was finished four months ago and during this time we have tried to sell our old house without any luck. We received our interim occupation certificate for the new house a month ago and have since moved in and started changing our address details.

    Our old house is going back on the market to see if we can sell it. We are also considering selling the new house as we need to sell one to easy the rising monthly loan repayments. Can you tell me if we would pay CGT in these scenarios:

    a) if we are successful in selling the old house which is not rented out and never has been but is no longer our main residence, or

    b) if we sell the new house and move back to the old house and if so do we need to live in the new house for any minimum period, or

    c) we try and sell both houses and buy another cheaper house

    • finder Customer Care
      BelindaJanuary 12, 2016Staff

      Hi Paul,

      Thanks for reaching out.

      Firstly, I’d like to point out that finder.com.au is an online comparison service so while we can provide general information we cannot offer personal advice regarding the tax implications of the sale of your assets. Please treat the following as general information only.

      a) In this case, the ATO may exempt this purchase from CGT if it’s your main place of residence. Generally, you can only have one place of residence unless you’re selling your old main residence and buying another. In this situation, you have an overlap of 6 months as long as the new property will be your main residence and you lived in the old property for a continuous period of 3 months in the 12 months before you sold it.

      b) The above applies. The ATO will only allow one property to realise the main residence exemption.

      c) You may be exempt from CGT for one main place of residence if you satisfy all exemptions as stipulated by the Australian Taxation Office (ATO). As mentioned, CGT on the main residence is exempt while other properties such as investment properties generally attract CGT.

      You can learn more about CGT exemptions on this page where you can also fill out the form to speak with a property tax specialist.

      Regards,
      Belinda

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