Q. I will be selling my marital home soon and plan on moving in to my investment property I have rented out for the last 3 years, interest only and negative gearing against my other income. I read that if I move in to my previously rented property and live there for at least 2 years there would be no Capital Gains Tax (CGT) on it when I ultimately sell it. Is this still the case ?
A. Capital Gains tax is payable on all investment assets purchased on or after 20 September 1985. As you didn’t move into the property as soon as was practical after purchase and it was not your principal residence, it has a CGT liability.
The liability for Capital Gains on sale of the property will be pro rated between the time it was an investment property and the time it is you principal place of residence. In your case, if you moved into the property now and sold the property in 7 years, you would be liable to pay CGT on 30% of the gain; 3 out of 10 years.
If you had lived in the property for at least 3 months then moved out and subsequently rented the property for no more than 6 years and then moved back in, you could elect to treat the property as your main residence for the entire period and pay no CGT. It also depends on what you were doing for those 6 years. If you were renting elsewhere, or living overseas, you can use this exemption. If you had another principal place of residence during this time then that property would be up for CGT.
The ATO has published a “Guide to Capital Gains tax 2012” www.ato.gov.au or contact your accountant for further information.
Follow me on Twitter @andrewheavenfp
The above Q & A was originally published in the The Australian