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CGT of two residential properties

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Q: A husband and wife own two residential properties. One property is owned in the husband's name. He lives in the property while he travels away for work. The other property, owned in the wife's name, is where she and the kids live.

The question is about the CGT implications if they were to sell either property. Even there is only one property deemed to be the principle place of residence but what happens in this case where there is only one name on each of the titles and the properties have only been occupied by our clients?

 

A:Based on the description of the facts, there appears to be no basis by which the husband and wife could support an argument to the ATO that they are entitled to have two main residences at the same time for CGT exemption purposes. The fact that the two properties are not jointly owned is immaterial in the ATO's view. While they could be free to choose which of the two properties to deem their main residence, it suspects that the one owned by the husband is unlikely to qualify as his main residence in any event on the simple basis of the facts. The general ATO principles to determine main residence include:

  • where the husband has his mail delivered;
  • where his address is for electoral role purposes;
  • what address is on his driver's license;
  • what address has been included on his income tax return each year, and
  • where most of his personal possessions are.

If the answer to all (or most) of those questions of fact are the wife's house, then the husband's house does not qualify as his main residence in the first place. Strictly speaking, under ITAA 1997, it is possible for each of them to claim a main residence exemption for part of their ownership period of their respective houses (so that the two periods add up to the total time the two properties have been owned simultaneously). However, given the suspicion of the true facts of the husband above, that provision would not be available in this case.

Written by Panbo Ye

I help people discover POWERFUL unknowns in Tax Ideas | Wealth Strategies | Retirement Planning | Finance Solutions!

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