When you sell your principal place of residence in Australia, the profit - known as capital gain - is typically exempt from tax. This is called the main residence exemption.
Let's look at an example:
- You purchase a home for $700,000 and sell it after 7 years for $950,000
- The $250,000 gain is entirely tax-free
- If this were an investment property, you'd pay capital gains tax - potentially around $75,000 assuming a 30% marginal tax rate and 50% CGT discount
THE SIX-YEAR RULE
If you move out and rent your property, you can still claim it as your primary residence for up to six years, provided you don't nominate another home.
WHY THIS MATTERS
The CGT exemption can be one of the most valuable tax breaks available to homeowners. It allows you to recycle equity, reinvest, or downsize later - without a tax hit.
WHAT TO DO NEXT
If someone is choosing between buying to live in, or rent out, CGT should be part of that discussion. We guide clients, with advice from tax and finance professionals, on how to structure their purchase for long-term financial outcomes.
* The Content does not constitute and is not intended to be financial or other advice and is not to be relied upon as the basis for any investment or other decision. Investors should seek their own professional advice tailored to their own particular financial circumstances in relation to any investment they may consider making.
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