CGT on properties owned by a couple separately
Scenario:
My wife and I own two residential properties. One property is owned under my name. I live in the property while I travel away for work. The other property, owned in my wife's name, is where she and our kids live.
The question is about the CGT implications if we were to sell either property. Even there is only one property deemed to be the principal 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 my wife or me?
Explanation:
Based on the description of the facts, there appears to be no basis by which you and your wife could support an argument to the ATO that you 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 you could be free to choose which of the two properties to be treated as your main residence, it might be the case that the one owned by you is unlikely to qualify as your main residence in any event on the simple basis of the facts. The general ATO principles to determine the main residence include:
- where you has your own mail delivered;
- where your address is for electoral role purposes;
- what address is on your driver's license;
- what address has been included on your income tax return each year, and
- where most of your personal possessions are.
If the answer to all (or most) of those questions of fact is your wife's house, then your house does not qualify as your main residence in the first place. Strictly speaking, under ITAA 1997, it is possible for each of you to claim the main residence exemption for part of the ownership period of your 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 your situation above, that provision would not be available in this case.