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  • When your spouse or children live in a different home to you

    Having a different home from your dependent child

    If you and a dependent child under 18 years of age have different homes for a period, you must choose one of the homes as the main residence for both of you for the period.

    Having a different home from your spouse

    If you and your spouse have different homes for a period, you and your spouse must either:

    • choose one of the homes as the main residence for both of you for the period, or
    • nominate the different homes as your main residences for the period.

    If you nominate different homes for the period and you own 50% or less of the home you have nominated, you qualify for an exemption for your share. If you own more than 50%, your share is exempt for half the period you and your spouse have different homes.

    The same applies to your spouse. If your spouse owns 50% or less of the home they have nominated, they qualify for an exemption for their share. However, if your spouse owns more than 50% of the home, their share is exempt for only half the period you have different homes.

    This rule applies to each home the spouses own, whether they have sole ownership or own the home jointly (either as joint tenants or tenants in common).

    Your spouse includes another person (of any sex) who:

    • you were in a relationship with that was registered under a prescribed state or territory law
    • although not legally married to you, lived with you on a genuine domestic basis in a relationship as a couple.

    This rule also applies if you choose to treat a dwelling as your main residence after you move out, and this choice results in your having a different main residence from your spouse or a dependent child for a period.

    Example: Spouses with different main residences

    Under a contract that settled on 1 July 1998, Kathy and her spouse Grahame purchased a townhouse where they lived together. Grahame owned 70% of the townhouse and Kathy owned the other 30%.

    Under a contract that settled on 1 August 2000, they purchased a beach house which they owned in equal shares. From 1 May 2001, Kathy lived in their beach house while Grahame kept living in the townhouse. Grahame nominated the townhouse as his main residence and Kathy nominated the beach house as her main residence.

    Kathy and Grahame sold the beach house under a contract that settled on 15 April 2017. As it was Kathy's main residence and she owned 50% of it, she disregards her share of any capital gain or loss for the period she and Grahame had different homes (1 May 2001 to 15 April 2017).

    As Grahame did not live in the beach house or nominate it as his main residence when he and Kathy had different homes, he does not ignore his share of any capital gain or loss for any of the period he owned it.

    Grahame and Kathy also sold the townhouse under a contract that settled on 15 April 2017.

    Because Grahame owned more than 50% of the townhouse, it's taken to have been his main residence for half of the period when he and Kathy had different homes.

    If the total capital gain on the sale of the townhouse was $100,000, Grahame's share of the capital gain is $70,000 (reflecting his 70% ownership interest). The portion of the gain that Grahame disregards under the main residence exemption is:

    'Share of capital gain' multiplied by ('Days spouses have one main residence' divided by 'Total days property owned') equals 'Gain disregarded for period that spouses have one main residence'

    That is:

    $70,000 × (1,036 days ÷ 6,864 days) = $10,565

    Plus

    'Share of capital gain' multiplied by 50% multiplied by ('Days spouses have separate main residences' divided by 'Total days property owned') = 'Gain disregarded for period that spouses have separate main residences'

    That is:

    $70,000 × 50% × (5,829 days ÷ 6,864 days) = $29,722

    The total amount disregarded by Grahame is:

    $10,565 + $29,722 = $40,287

    As Grahame bought the townhouse before 21 September 1999 and entered into the contract to sell it after that time, and owned his share for at least 12 months, he can use either the indexation or discount method to calculate his capital gain.

    Kathy's share of the $100,000 capital gain on the townhouse is $30,000, reflecting her 30% ownership interest. The portion she disregards is:

    Share of capital gain multiplied by 50% mulitplied by (Days spouses have one main residence divided by Total days property owned) = Gain disregarded for period that spouses have one main residence

    Therefore

    $30,000 × (1,036 days ÷ 6,864 days) = $4,528

    As Kathy entered into the contract to buy the townhouse before 21 September 1999 and entered into the contract to sell it after that time, and owned her share for at least 12 months, she can use either the indexation or discount method to calculate her capital gain.

    End of example

     

    Example: Different main residences

    Anna and her spouse Mark jointly purchased a townhouse under a contract that settled on 5 February 1999. Both of them lived in it from that date until 29 April 2017, when the contract of sale settled. Anna owned more than 50% of the townhouse.

    Before 5 February 1999, Anna had lived alone in her own flat which she rented out after moving to the townhouse. She then sold her flat and settled the sale on 11 March 2000. Anna chose to treat the flat as her main residence from 5 February 1999 until she sold it, under the 'continuing main residence status after moving out' rule.

    Because of Anna's choice, Mark had a different main residence from Anna for the period 5 February 1999 to 11 March 2000. Therefore, Mark must either:

    • treat Anna's flat as his main residence for that period, or
    • nominate the townhouse as his main residence for that period.

    If he chooses to treat Anna's flat as his main residence, a part of any gain Mark makes when he sells the townhouse will be taxable. He will not get an exemption for the townhouse for the period that he nominated Anna's flat as his main residence (that is, 5 February 1999 to 11 March 2000).

    Assuming Mark nominates the townhouse as his main residence, he qualifies for a full exemption on any capital gain he makes when it is sold because he owns 50% or less of it. However, because Mark and Anna had different main residences as a result of Mark's choice, and Anna owned more than 50% of the flat, her gain on the flat will only qualify for a 50% exemption for the period from 5 February 1999 to 11 March 2000.

    End of example

    See also:

    Last modified: 17 Jul 2017QC 52190