Capital gain tax treatment
Scenario:
I have owned a residential property since February 2000. It was my main residence until October 2002 and has been fully tenanted until now. Since October 2002, I lived with my wife (property in her name) until March 2011 when her house was sold and we purchased a new house in joint names.
If I sell the rental property, is the 50% CGT reduction the best option (October 2002 until now)?
Can the six-year rule be applied until March 2011 and thus a 50% CGT reduction from March 2011 until now? Is any other option available?
Explanation:
It is required that when couples each have a dwelling that is their main residence, s118-170 of ITAA 1997, they to nominate one dwelling as their main residence or nominate the different dwellings as the main residence of each. In the latter case, their exemption is effectively halved. When your wife’s dwelling was sold, did you and your wife treat it as your main residence? If so, my concern is that you cannot use the absence rule for your former dwelling for the period up to March 2011.
In any case, March 2011 is more than six years from October 2002. In the absence of further information in respect of your wife’s former dwelling, the best option for you would be the 50% general discount on the gain made over and above the deemed market value cost base of the rental property at the time it was first rented.