Generally, if you are an individual (not a company or trust) you can ignore a capital gain or capital loss from a CGT event that happens to your ownership interest in a dwelling that is your main residence (also referred to as ‘your home’). However, special rules apply if the interest in the dwelling is held by the trustee of a Special Disability Trust. In such cases, the trustee of the Special Disability Trust will be eligible for any main residence exemption to the extent the individual principal beneficiary of the Special Disability Trust would have been if that individual principal beneficiary owned the interest in the dwelling.
To get the full exemption from CGT:
- the dwelling must have been your home for the whole period you owned it
- you must not have used the dwelling to produce assessable income
- any land on which the dwelling is situated must be two hectares or less, and
- you must not be an excluded foreign resident at the time the CGT event occurs.
If you inherited a dwelling or a share of a dwelling and it was not the deceased’s main residence, you are unlikely to get a full exemption. See Flowchart 3.6 in appendix 3, and Inherited main residence.
You may get only a partial exemption if:
- the dwelling was your main residence during only part of the period you owned it
- you used the dwelling to produce assessable income, or
- the land on which the dwelling is situated is more than two hectares.
Short absences from your home (for example, annual holidays) do not affect your exemption.
If you are a foreign resident when a CGT event happens to your residential property in Australia you may no longer be entitled to claim the main residence exemption.
Where the deceased was a foreign resident, the changes may also apply to:
- legal personal representatives, trustees and beneficiaries of deceased estates
- surviving joint tenants
- special disability trusts.
There is a transitional period for properties acquired before 7.30pm AEST on 9 May 2017 which are disposed of on or before 30 June 2020. For properties acquired at or after 7.30pm AEST on 9 May 2017, the CGT main residence exemption no longer applies to disposals from that date unless certain life events occur within a continuous period of six years of the individual becoming a foreign resident for tax purposes.
If a dwelling was not your main residence for the whole time you owned it, some special rules may entitle you to a full exemption or to extend the partial exemption you would otherwise get. These rules can apply to land or a dwelling if you:
- choose to treat the dwelling as your main residence, even though you no longer live in it, see Continuing main residence status after dwelling ceases to be your main residence
- moved into the dwelling as soon as practicable after its purchase, see Moving into a dwelling
- are changing main residences, see Moving from one main residence to another
- are yet to live in the dwelling but will do so as soon as practicable after it is constructed, repaired or renovated and you will continue to live in it for at least three months, see Constructing, renovating or repairing a dwelling on land you already own, or
- sell vacant land after your main residence is accidentally destroyed, see Destruction of dwelling and sale of land.
There are some special CGT rules that are not covered in this section that may affect you if your home was:
- destroyed and you receive money or another asset as compensation or under an insurance policy, see Loss, destruction or compulsory acquisition of an asset
- transferred to you as a result of its conversion to strata title, or
- compulsorily acquired, see Loss, destruction or compulsory acquisition of an asset.
If you own more than one dwelling during a particular period, only one of them can be your main residence at any one time.
The exception to this rule is if you move from one main residence to another. In this case you can treat two dwellings as your main residence for a limited time, see Moving from one main residence to another.
Special rules apply if you have a different main residence from your spouse or dependent children, see Having a different home from your spouse or dependent child.
If you are a foreign resident when a CGT event happens to your residential property in Australia, you may no longer be entitled to claim the main residence exemption. There is a transitional period for properties acquired before 7.30pm AEST on 9 May 2017 which are disposed of on or before 30 June 2020. For properties acquired at or after 7.30pm AEST on 9 May 2017, the CGT main residence exemption no longer applies to disposals from that date unless certain life events occur within a continuous period of six years of the individual becoming a foreign resident for tax purposes.
Downsizer contributions and capital gains tax
A downsizer contribution allows people who are 65 years old and older at the time of making the contribution, to sell their home and make a contribution to superannuation based on the proceeds of the sale. This also applies to people who may otherwise be prevented from making contributions into superannuation due to:
- work status, or
- contribution cap restrictions.
There are various criteria to be eligible to make a downsizer contribution.
To make a downsizer contribution, the capital gain or loss from the sale of the home must be disregarded, in whole or part, because the property has been treated as your main residence (for the purposes of the main residence exemption for CGT). A partial main residence CGT exemption (for the purposes of the downsizer contribution eligibility) may apply in a variety of situations, including where the home:
- was not your main residence for the entire period of ownership
- was used to produce assessable income (in whole or part) for a period of time during the ownership, or
- is on land greater than two hectares.
You may not have a capital gain or loss to disregard because, for example:
- your home was a pre-CGT asset (that is, if it was acquired before 20 September 1985), or
- your spouse owned the home that was sold.
If your home was a pre-CGT asset you can still make a downsizer contribution if would be entitled to such an exemption if your home was a CGT asset rather than a pre-CGT asset.
If your home that was sold was only owned by one spouse, the spouse that did not have an ownership interest may also make a downsizer contribution, or have one made on their behalf, provided they meet all of the other requirements