Home sweet home (capital gain tax) (issue number 2)

As mentioned in the previous issue , a home is exempt from capital gain tax (CGT) if it is your main residence.

However you main residence are not fully exempted from CGT if you:

1. acquired your dwelling on or after 20 September 1985 and used it as your main residence, and
2. used any part of it to produce income during all or part of the period you owned it, and
3. would be allowed a deduction for interest had you incurred it on money borrowed to acquire the dwelling. (interest deductibility test)

Interest deductibility test applies regardless of whether you actually borrowed money to acquire your dwelling. You must apply it on the assumption that you did borrow money to acquire the dwelling.

The following are examples where a main residence are partly use to produce income:

1. You rent out part of your main residence.
2. You used part of your main residence as place of business
   
   

Note: A mere convenient place to work at is not a place of business

Source: Using your home to produce income