Property Purchase and Main Residence

Posted On: Thursday, March 28, 2019

Hello. I refer to October 2014, Tax Smart magazine, issue number 0071, example 1, on page 29.

This is where Susan purchased a property in Melbourne for $300,000 and occupied it as her main residence for 5 years.

She moved to Sydney for work in 2000 and rented out her Melbourne house. A qualified valuer valued the MV of her house at $650,000 at that time.

In 2007 she stays in Sydney and sells her house for 1.35 mills. (I.e. 7 years it was rented out).

The cost base becomes $650,000 and she only pays capital gains tax on the difference.

Our query is this:

If Susan rented her house for less than 6 years, however also bought a new house in Sydney during this time, can she still claim her Melbourne house as her main residence or would she have to treat her new house in Sydney as her main residence from the time she bought it?

I.e. does renting versus buying a house in Sydney affect the Melbourne main residence status?

Answer — It is only one principal place of residence at one time. If you are in the process of buying/selling, then there can be an overlap of up to six months.

If Susan moves back in within 6 years, the 6 years gets “freshened up” again.

Susan can still effectively elect which house is her main residence for the relevant six-year temporary absence.

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