Question from TJ: I bought a home in 2005 and lived in the house until 2007 before I was transferred overseas for work. From 2008 to 2014, I have rented out the property. I was a non-tax resident when submitting tax returns during this period. I am planning to move back to Australia next year (2015) and move back into the house and live in the property for at least 12 months. Will I be subject to Capital Gains tax if I decide to sell the house after residing in the home for 12 months once I return?
A property first established as a Main Residence (MR) immediately after acquisition will be exempt from capital gains tax (CGT) when sold at a profit.
The house can continue to be nominated as the main residence for another 6 years while rented. If sold within those 6 years it will be exempt from CGT.
The condition is that no other property can be nominated as the main residence. Where the rental period exceeds the 6 years, some CGT may be assessable.
CGT will be calculated based on the difference between the sale price and the cost base. The cost base will be the market value when first rented.
Once the capital gain is calculated, a partial exemption is available for the period of occupation as a main residence, which includes the 6 years and the 12 months of re-occupation.
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DISCLAIMER: Readers should not act on the information above without obtaining professional advice relevant to their circumstances. It is intended as information only.