Will I have to pay Capital Gains Tax (CGT) if I decide to sell my house after living in it for 12 months?

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 one 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.

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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4 Responses

  1. Default Gravatar
    juttaJanuary 4, 2018

    I have inherited my father’s house, which is valued $300,000. I intend to move and live in the house and want to invest to modernise etc. Do I have to pay capital gains tax when I sell for a higher Price ( ca. 12 months later). If so how high would this be?
    Many thanks!

    • Staff
      RenchJanuary 5, 2018Staff

      Hi Jutta,

      Thanks for your inquiry.

      If you’re selling an investment property, the CGT calculation is based on the sale price of a property minus your expenses. These expenses are called your cost base. The cost base is the total sum of the original purchase price, plus any incidentals, ownership and title costs minus any government grants and depreciable items.

      The first inherited property was the father’s principal place of residence so it will not incur either CGT or stamp duty once it’s sold or transferred. If your father didn’t nominate any other property as his principal place of residence while the property was being rented for the 12 month period, then there will be no CGT payable from the estate.

      You may get this info on this page and you may seek general help with Property Tax Specialists by clicking on the ‘Go to site’ button.

      Best regards,

  2. Default Gravatar
    NatashaSeptember 22, 2017

    Hi, I purchased a rental property (as an investment) in Brisbane in April 2014, for $330,000. I have been tenanted straight away, for 3 years in total. I moved in the house as a place of principal residence in June 2017. I plan to renovate the property and sell it next year, living in it for 1.5 years. The current market indicates that house will sell in 2018 for around $530,000. The estimated profit will be $200,000. How much CGT will I have to pay?
    Thank you, Natasha

    • Default Gravatar
      JonathanSeptember 22, 2017

      Hello Natasha,

      Thank you for your inquiry.

      Capital gain is the difference between your proceeds and the cost base of your asset. For assets held for 12 months or more before the relevant CGT event CGT discount method may apply. This is allowing you to reduce your capital gain by 50% for resident individuals.

      You can reduce the capital gain only after you have applied all the capital losses for the income year and any unapplied net capital losses from earlier years. Assuming that you have no capital losses, from the gain of $200,000, you would only need to declare $100,000 as capital gain, which eventually will be included in your taxable income and taxed at your marginal rate.

      Hope this helps.


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