Do I pay capital gains tax when I sell my home in Australia?
No, you generally do not pay Capital Gains Tax (CGT) when selling your home in Australia if it has been your main residence for the entire period of ownership.
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How it works in practice
Understanding Capital Gains Tax (CGT)
Capital Gains Tax (CGT) is the tax you pay on the profit (capital gain) made from selling an asset, such as real estate. In Australia, your principal place of residence, often referred to as your "main residence," is generally exempt from CGT.
The Main Residence Exemption
The main residence exemption means that if the property was solely your home for the entire period you owned it, and you haven't used it to produce income, you typically won't pay CGT when you sell it. This exemption aims to ensure that homeowners are not taxed on the increase in value of their family home.
Important exceptions
The main residence exemption has several important exceptions and conditions. CGT may apply if you used part of your home to produce income (e.g., rented a room, ran a business from home) or if the property was not always your main residence.
Special rules, such as the 'six-year rule,' allow you to treat a property as your main residence for up to six years after you move out, provided you don't treat another property as your main residence during that time. Foreign residents, even if the property was their main residence, may not be eligible for the main residence exemption for periods after 30 June 2020.
What you should do now
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Confirm if the property was your main residence for the entire ownership period. If so, you are likely exempt from CGT.
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Identify any periods where the property, or a portion of it, was used to produce income (e.g., rented out, used for business).
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Keep thorough records of all relevant dates, purchase costs, sale proceeds, and any expenses related to the property.
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Consider the 'six-year rule' if you moved out of the property but did not acquire another main residence.
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Consult with a qualified tax advisor or the Australian Taxation Office (ATO) if your situation is complex.
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