Understanding the ATO's Main Residence Exemption

Posted 11 Jul

Understanding the ATO's Main Residence Exemption: Key Tips for Homeowners

When selling a property you've lived in, it's crucial to understand the Australian Taxation Office's (ATO) main residence exemption to avoid unexpected tax issues. Here are some essential tips to help you navigate this area effectively:

  • Income from Your Home: If you've started earning income from your property, whether by renting out a room or the entire home, this could impact your Capital Gains Tax (CGT) obligations. In such cases, obtaining a market valuation of your home at the time you began earning income is important for accurate CGT calculations.
  • The 6-Year Absence Rule: If you've moved out of your main residence and started renting it out, you might be eligible to use the 6-year absence rule. This rule allows you to treat your property as your main residence for up to six years while it’s rented out, which can be beneficial when you eventually sell the property.
  • One Main Residence at a Time: You can only designate one property as your main residence at any given time. However, there is an exception if you are moving from one home to another. The ATO allows a 6-month overlap period where both properties can be treated as your main residence.
  • Change in Residency Status: If your residency status changes, it could impact your eligibility for the main residence exemption. It’s important to understand how these changes might affect your tax obligations.

Navigating the ATO’s main residence exemption rules can be complex, but staying informed can help you make better financial decisions and avoid potential tax pitfalls.

How Trinity Advisory Can Help

If you need further clarification or assistance, our team at Trinity Advisory is here to help. We specialise in guiding small business owners through tax-related challenges, ensuring you have the support and expertise needed to achieve your financial goals. If you’re a small business owner needing sounds advice and guidance, contact us today!

Ref: NTAA Practice Update - July 2024


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