Main Residence Exemption Tips

The main residence exemption is an important consideration if you plan to sell your house. If you're eligible, any profit or capital gain you make from the sale of your property is wholly disregarded or partially tax-free.

The ATO has noticed some issues with people not reporting capital gains, losses, or using the main residence exemption appropriately when selling their properties. Therefore, to benefit from this valuable exemption and avoid any potential loss, it is important that you understand the rules if you consider selling your property in the near future.

Here are some helpful tips:

• If you ever earned any income from your home, you might need a market valuation for partial capital gains tax (CGT) exemption if you either rented out part or all of your home or ran a business from your home.
• If you rented out a property that was your main residence, consider the 6-year absence rule when you sell. If you choose this option, include the main residence exemption in the CGT section of your tax return. The rule resets if  you move back into your main residence before the 6-year period expires.
• If you sold your property recently, don’t forget to include the details of the sale of your property even if the whole capital gain is tax-exempt. The ATO receive property sale transaction data from the state revenue authorities, such as the property address, contract date, settlement date, and sale price. Therefore any omission or discrepancy might result in your being contacted by the ATO in their data matching process. 
• For those who own multiple properties, the rules only allow you to have one main residence at a time, with the exception of a 6-month period when moving from one home to another. However, you do have the choice to apply the exemption to the property that gives you the highest tax benefit.
• If your tax residency in Australia has changed during the year, your CGT obligations might have changed too. So if you decide to move overseas before selling your property, remember to speak to your accountant to ensure you don’t lose this valuable tax exemption.