Typically, a primary residence is free from capital gains tax (CGT). The main residence exemption applies from the moment you acquire the property, on the condition that you move in as soon as practically possible.
If you purchase your primary residence, the acquisition date is the settlement date of the contract. However, there are exceptions to this rule. If you experience unforeseen circumstances such as illness, your home remains exempt as long as you move in as soon as the issue is resolved.
Additionally, if the property is rented to someone else, it cannot be considered your primary residence until you move in. If you have not sold your old home, you may treat both homes as your primary residence for up to six months.
Moving into your primary residence is one way to avoid capital gains tax (CGT) on the property. However, to qualify for this exemption, you need to move in as soon as practically possible after acquiring the property for CGT purposes. If you bought the property, the settlement date of the contract is considered the acquisition date for CGT purposes.
That said, there are some exceptions to this rule that you need to keep in mind:
If you acquire a property and move into it as soon as practicable after settling the contract, you can consider it as your primary residence from the date of acquisition, even if you are sent overseas for work shortly after. During the period in which you treat a property as your primary residence, you cannot treat any other property as your primary residence, except for a limited period when you are moving house.
If you’ve purchased a new home but haven’t yet disposed of your old one, you may be wondering how to avoid capital gains tax. The good news is that both homes can be considered your primary residence for up to six months, provided that you meet certain conditions.
First, you must have lived in your old home as your main residence for at least three months out of the 12 months prior to its disposal.
Additionally, you cannot have used it to generate income in the 12 months when it was not your primary residence.
Once you’ve acquired your new home, it must become your primary residence to qualify for the exemption from capital gains tax. This means that you’ll need to move in as soon as possible and make it your primary residence.
By following these guidelines, you can potentially save thousands of dollars in capital gains tax when you move to a new home. For more information and advice on how to manage your taxes when buying or selling a property, consider consulting with a professional accounting firm like Aero Accounting Group.
Understanding the primary residence exemption is critical when it comes to Capital Gains Tax (CGT) on real estate. Moving into your principal residence as quickly as possible after purchasing it exempts it from CGT, albeit there are few exceptions. Some of these exceptions include unforeseeable situations, renting out the property, and owning two homes. If you are relocating to a new home, both can be deemed your primary residence for up to six months if certain circumstances are met. Following these principles could save you thousands of dollars in CGT.
For even more expert advice on managing your taxes, consider consulting with a professional accounting firm like Aero Accounting Group.
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