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  • Living separately to your spouse or children

    If you live in a different home to your spouse or dependent children, you need to choose which home will be your main residence for capital gains tax (CGT) purposes.

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    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
    • each nominate one of the different homes as your main residence 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 rule applies to your spouse.

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

    Example: spouses with different main residences

    On 1 July 1998 Kathy and her spouse Grahame settled the purchase of a townhouse and moved in together. Grahame owned 70% of the townhouse and Kathy owned the other 30%.

    On 1 August 2000 they settled the purchase of a beach house, which they owned in equal shares.

    From 1 May 2001:

    • Kathy lived in their beach house and nominated it as her main residence.
    • Grahame kept living in the townhouse and nominated it as his main residence.

    On 15 April 2019 Kathy and Grahame sold both the townhouse and beach house.

    Beach house

    As the beach house 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 2019).

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

    Townhouse

    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). Because Grahame owned more than 50% of the townhouse, it is taken to have been his main residence for half of the period when he and Kathy had different homes. He is entitled to the main residence exemption for the entire period that he and Kathy lived together in the townhouse.

    The amount of the gain that Grahame disregards under the main residence exemption is:

    • share of capital gain
    • multipled 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 ÷ 7,594 days) = $9,550

    plus

    • share of capital gain
    • multiplied by: 50%
    • multiplied by: days spouses have separate main residences
    • divided by: total days property owned
    • equals: gain disregarded for period that spouses have separate main residences

    That is:

    $70,000 × 50% × (6,559 days ÷ 7,594 days) = $30,230

    The total amount disregarded by Grahame is:

    $9,550 + $30,230 = $39,780

    Grahame's capital gain on the townhouse is therefore:

    $70,000 − $39,780 = $30,220

    Kathy's share of the $100,000 capital gain on the townhouse is $30,000, reflecting her 30% ownership interest. She is entitled to the main residence exemption for the period that she and Grahame lived together in the townhouse. The amount she disregards is:

    • share of capital gain
    • multipled 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:

    $30,000 × (1,036 days ÷ 7,594 days) = $4,093

    Kathy's capital gain on the townhouse is therefore:

    $30,000 − $4,093 = $25,907

    CGT discount

    Kathy and Grahame can use the CGT discount to reduce their respective capital gains (after applying any capital losses) because they owned the townhouse and beach house for at least 12 months and are Australian residents. (For the townhouse, which was bought before 21 September 1999, they have the option of indexing the cost base instead of using the discount.)

    End of example

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

    Example: different main residences and continuing main residence

    On 5 February 1999 Anna and her spouse Mark bought a townhouse and moved in together. Anna owned more than 50% of the townhouse.

    Before moving into the townhouse Anna had lived alone in her own flat. After moving into the townhouse she rented out her flat.

    On 11 March 2000 Anna sold her flat. She 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.

    On 29 April 2019 Anna and Mark sold their townhouse.

    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 capital 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).

    If 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.

    Anna's capital gain on the townhouse for the period 5 February 1999 to 11 March 2000 is taxable.

    End of example

    Definition of spouse

    Your spouse is another person who is:

    • legally married to you
    • in a relationship with you, and the relationship is registered under a prescribed state or territory law, or
    • not legally married to you, but lives with you on a genuine domestic basis in a relationship as a couple.
    Last modified: 04 Aug 2021QC 66032