If you acquire a new home before you dispose of your old one, both dwellings are treated as your main residence for up to six months if:
- the old dwelling was your main residence for a continuous period of at least three months in the 12 months before you disposed of it
- you did not use it to produce assessable income in any part of that 12 months when it was not your main residence, and
- the new dwelling becomes your main residence.
If you dispose of the old dwelling within six months of acquiring the new one, both dwellings are exempt for the whole period between when you acquire the new one and dispose of the old one.
If you disposed of your old home before 1 July 1998, both homes are exempt for a maximum of three months.
Example – Exemption for both homes
Jill and Norman bought their new home under a contract that was settled on 1 January 2004 and moved in immediately. They sold their old home under a contract that was settled on 15 April 2004. Both the old and new homes are treated as their main residence for the period 1 January to 15 April even though they did not live in the old home during that period.End of example
If it takes longer than six months to dispose of your old home, both homes are exempt only for the last six months before you dispose of the old one. You get only a part exemption when a CGT event happens in relation to your old home.
Example – Part exemption for a first home
Jeneen and John bought their first home under a contract that was settled on 1 January 1997 and moved in immediately. It was their main residence until they bought their second home under a contract that was entered into on 2 November 2002 and settled on 1 January 2003.
They retained the first home after moving into the new one but did not use it to produce income. They sold the first home under a contract that was settled on 1 October 2003. They owned this home for a total period of 2,465 days.
Both homes are treated as their main residence for the period 1 April 2003 to 1 October 2003, the last six months that Jeneen and John owned their first home. Therefore, their first home is treated as their main residence only for the period before they moved into their new home and during the last six months before its sale.
The 89 days from 1 January 2003 to 30 March 2003, when it was not their main residence, are taken into account in calculating the proportion of their capital gain that is taxable (89 ÷ 2,465).
Because they entered into the contract to acquire their old home before 11.45am (by legal time in the ACT) on 21 September 1999 and entered into the contract to sell it after that time, and held it for at least 12 months, Jeneen and John can use either the indexation or the discount method to calculate their capital gain.End of example