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Leon, Solicitor
Category: Australia Law
Satisfied Customers: 44661
Experience:  BEc Dip Ed, Dip Law (SAB) MTax (UNSW)
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I was wondering if I have to pay capital gains tax on my

Customer Question

Hi I was wondering if I have to pay capital gains tax on my principal place of residence if for some reason I may have to sell it in say 5-6 years.
I purchased my property in January 2013 and leased it out for 12 months and we moved in in January/February 2014 and have been residing there since.
This is my only property. I do not have investment properties.
When I leased the property in 2013, my family and I were renting elsewhere.
I'm concerned that because I rented the property out in the first year I may have to pay capital gains tax.
Submitted: 1 year ago.
Category: Australia Law
Expert:  keeperumiami replied 1 year ago.

As long as you have owned & lived in the property as your primary residence for 2 out of the previous 5 years ending on the date of sale, you will qualify for the 250,000 single/500,000 married capital gain exclusion on the sale of your primary residence. In your case, you will have to pay capital gains tax on the depreciation you claimed or should have claimed during the period you rented the property.

If you didn't claim depreciation, you still have to make that adjustment as depreciation is what is called "allowed or allowable".

You would have figured the depreciation by allocating your purchase price between land & building (land isn't subject to depreciation), and then you would have divided the building cost by 27.5 years & that would have been the correct depreciation for that year that you rented the property. So, for example if you paid 375,000. for the property & allocated $100,000. to the land & 275,000. to the building, the depreciation for the year would have been $1,000. & the capital gains tax on that would most likely be $200., so this isn't a big deal.

Customer: replied 1 year ago.
Hi Stephen
Thankyou for your reply but I ink you are based in San Fransisco ,America and I reside in Sydney NSW Australia. So I think the information you gave me is for Capital Gains Tax in America. Is this the case????
Please let me know!!! much appreciated.
Expert:  keeperumiami replied 1 year ago.

Yes, your are absolutely correct, except that I am on Cape Cod in Massachusetts (the site is based near SanFrancisco, CA). Your question was put in the general Capital Gains Category instead of in Australia & I didn't see that indicated (I missed it); so I'll see if I can transfer it over to the correct category; it's a common question here :]..............................Steve G.

Expert:  Leon replied 1 year ago.

Good Morning

My name is ***** ***** I am a NSW Solicitor. Thank you for your question, and will do my best to assist you with your question. Please understand this is not legal advise Please understand this is not legal advice but a guide to assist you.

If it is your principal place of residence there is no Capital Gains Tax in Australia as it is exempt.

You can rent out your principal place of residence for a short period of time and you can have 2 principal places of residence for a period of 6 years.

You have nothing to worry about. I hope this makes sense and is of assistance. if there is nothing further

thank you for using my services.

If I have missed anything, or you have any further questions please let me know

If there is anything else in the future please do not hesitate to ask.

Please do not forget to leave positive feedback.



Customer: replied 1 year ago.
Thankyou for replying Leon
I hope you are correct, but I just want to emphasize that I rented my property for the first year after settlement. We didnt move in immediately as soon as we settled. We moved in 12 months later. My understanding by looking at the ATO website is that I may receive partial exemption because I leased the property before moving in.
I dont mean to question your answer but Im a little confused!!!Thanks