Capital Gains Tax Implications for Married Couple's Residential Properties
Let's explore the CGT implications if the couple were to sell either property:
1. Ownership Structure: One property is solely owned by the husband, where he resides while away for work. The other property is solely owned by the wife, where she and the children live.
2. CGT Exemption for Main Residence: The couple cannot claim CGT exemption for both properties simultaneously. While they can choose which property to designate as their main residence, certain factors determine eligibility:
- Address for Official Purposes: Factors like mail delivery, electoral roll address, driver's license address, and address on income tax returns are considered.
- Location of Personal Possessions: Where most personal belongings are kept can influence main residence determination.
3. Single Main Residence Designation: If most factual indicators point to the wife's property as the main residence, the husband's property is unlikely to qualify as his main residence. Consequently, he may not be eligible for CGT exemption on his property.
4. Partial Main Residence Exemption Possibility: Under ITAA 1997, each spouse could potentially claim a main residence exemption for part of the ownership period of their respective properties. However, if suspicions arise regarding the husband's true main residence, this provision may not apply.
Conclusion: While the couple can choose which property to designate as their main residence, factual indicators determine eligibility. If the husband's property doesn't meet main residence criteria, he may not qualify for CGT exemption upon sale.
For personalised advice on CGT implications and main residence designation, consult Tax Ideas Accountants & Advisers at +61 2 8318 1545 or schedule an appointment via our live calendar.
