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If you do not qualify for a full exemption from CGT for the home you may be entitled to a part exemption.
You calculate your capital gain or capital loss as follows:
Capital gain or capital loss amount × (non-main residence days ÷ total days)
Non-main residence days
'Non-main residence days' is the number of days that the dwelling was not the main residence.
- a. If the deceased acquired the dwelling before 20 September 1985, non-main residence days is the number of days in the period from their death until settlement of your contract for sale of the dwelling when it was not used to produce income and was not the main residence of one of the following:
- a person who was the spouse of the deceased (except a spouse who was permanently separated from the deceased)
- an individual who had a right to occupy the dwelling under the deceased's will or
- you, as a beneficiary, if you disposed of the dwelling as a beneficiary.
- b. (b) If the deceased acquired the dwelling on or after 20 September 1985, non-main residence days is the number of days calculated under (a) plus the number of days in the deceased's period of ownership when the dwelling was not their main residence.
- c. If the deceased acquired their ownership interest before 20 September 1985, 'total days' is the number of days from their death until you disposed of your ownership interest.
- d. If the deceased acquired the ownership interest on or after 20 September 1985, total days is the number of days in the period from when the deceased acquired the dwelling until you disposed of your ownership interest.
Vicki bought a house under a contract that was settled on 12 February 1994 and she used it solely as a rental property. When she died on 17 November 1997, the house became the main residence of her beneficiary, Lesley. Lesley sold the property under a contract that was settled on 27 November 2001.
As Vicki had never used the property as her main residence, Lesley cannot claim a full exemption from CGT. However, as Lesley used the house as her main residence, she is entitled to a part exemption from CGT.
Vicki owned the house for 1,375 days and Lesley then lived in the house for 1,471 days, a total of 2,846 days. Assuming Lesley made a capital gain of $10,000, the taxable portion is:
$10,000 × (1,375 ÷ 2,846) = $4,831
As Lesley entered into the contract to purchase the property before 11.45 am on 21 September 1999 and entered into the contract to sell it after that time, and held the property for at least 12 months, she can use either the indexation or the discount method to calculate her capital gain.
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There are some situations in which any non-main residence days and total days before the deceased's death are ignored in calculating the capital gain or capital loss. This happens if:
- you acquired the dwelling before 21 August 1996 and during the full period the deceased owned it, the dwelling was their main residence and was not used to produce income or
- you acquired the dwelling after 20 August 1996 and it was the deceased's main residence just before their death and was not being used to produce income at that time.
If you disposed of your ownership interest in the dwelling within 2 years of the person's death, you can ignore the main residence days and total days in the period from the person's death until you dispose of the dwelling if this lessens your tax liability.
Last modified: 06 Oct 2009QC 27417