The sale of a property may be subject to capital gains tax (CGT) depending on a few factors, including whether the property is the seller’s main residence. The main residence exemption is a valuable tool for reducing or avoiding CGT on the sale of a property that is the seller’s main residence.

To be eligible for the main residence exemption, the property must have been used as the seller’s main residence for the entire period of ownership. This means that any periods where the property was rented out or used for business purposes may affect the exemption. However, there are a few exceptions to this rule, such as where the property is used as a place of business and the owner lives on the premises.

The main residence exemption also has a six-year rule, which allows a seller to treat a property as their main residence for up to six years after they have moved out if the property is not used to produce income during that time. This can be beneficial for sellers who choose to rent out their property for a period before selling. The property must also be on land of 2 hectares or less.

It’s important to note that the main residence exemption can only apply to one property at a time, and that there are additional rules and restrictions for foreign residents and trusts.

In summary, the main residence exemption is an important consideration for anyone selling a property in Australia. By carefully considering the eligibility criteria and any periods of rental or business use, sellers can potentially reduce or avoid CGT on the sale of their main residence. If you require more assistance on this matter, please contact our office at 03 9973 5905.