Home sweet home (capital gain tax) (Issue number 4)

If you start using part or all of your main residence to produce income for the first time after 20 August 1996, a special rule affects the way you calculate your capital gain or capital loss.

In this case, you are taken to have acquired the dwelling at its market value at the time you first used it to produce income if all of the following apply:

1. you acquired the dwelling on or after 20 September 1985;
2. you first used the dwelling to produce income after 20 August 1996;
3. when a capital gains tax (CGT) event happens in relation to the dwelling, you would get only a part exemption because you used the dwelling to produce assessable income during the period you owned it; and
4. you would have been entitled to a full exemption if the CGT event happened to the dwelling immediately before you first used it to produce income.

If all of the above apply, you must work out your capital gain or capital loss using the market value of the dwelling at the time you first used it to produce income. You do not have a choice.

A similar rule applies if you inherit a dwelling that was the deceased’s main residence and you use it to produce income.

If you missed the previous three issues, please click here: Issue 1 , Issue 2, Issue 3

Source: Home first used to produce income

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