SCC Chartered Accountants

   

The family home can have CGT too

Even though your family home is usually exempt Capital Gains Tax, there may be instances where it may apply.

If the family home was bought on or after 20 September 1985 it is advisable to keep all records relating to the home, just as you would for an investment property. If the home stops being fully exempt at some time in the future, you will need to know the full cost of the home so that you do not pay more CGT than necessary. If you do not have sufficient records, reconstructing them later could be difficult and expensive.

If the property is your home and you use it to produce income (for example, by renting out part or all of it), you will need to keep records of the period the home is producing income and the proportion of the home you have used to produce income.

If, after 20 August 1996, you use your home for income-producing purposes for the first time, you will be taken to have acquired your home at that time for its market value. You will use this as your acquisition cost for the purpose of calculating a capital gain or capital loss when you sell or dispose of it. You will still need to keep details of expenses relating to your home after the date that it started producing income.

An inherited house could mean inherited CGT

If you inherit a house that was the deceased’s main residence, any capital gain on its subsequent disposal may be exempt. However, until this is known, you should keep records of relevant costs incurred by you, the deceased or their trustee or executor.

You will not need to keep records of the deceased’s costs if:

• you inherited the house after 20 August 1996
• the house was the deceased’s main residence just before they died, and
• the house was not being used to produce income at the time of death.

In those circumstances, you will be taken to have acquired the house at its market value at the date of death. If the executor or trustee has a valuation of the property, get a copy of that valuation report. Otherwise you will need to get your own valuation.

Asset registers can help

You can enter information from your capital gains tax records into an asset register. If you keep an asset register you can discard records that you might otherwise be required to keep for long periods of time. The information must be certified by a registered tax agent or a person approved by the Commissioner of Taxation.

More information

More information is available in the Australian Tax Office publications Rental Properties2003-04 (Nat 1729-6.2004) and Guide to Capital Gains Tax 2003-04 (Nat 4151-6.2004).

To obtain a copy of these booklets, visit the Tax Office website at www.ato.gov.au or call 1300 720 092.

Disclaimer: Information provided is not intended as advice nor should it be received as advice. This information is provided as a guide only.