Given the Australian love affair with property, it’s important to have a clear understanding of the tax implications and how you can seek to minimise your Capital Gains Tax (CGT) liability.
Here we’re referring to the 6 Year Rule. The 6-year rule states that a property that was previously your primary residence can continue to be exempt from Capital Gains Tax if it’s sold within a 6 year period of it first being rented out. This is applicable where you’ve not nominated another property as your main residence over the same time period.
Let’s consider some scenarios.
John has moved to Singapore 5 years ago and decided to rent out his previous home in Melbourne. As John put his home on the market to rent as soon as he left Australia, the 6-year clock started ticking 5 years ago. This would mean that John currently has one year left of the CGT-free status. It’s at this point that John may wish to consider his options, whether it be returning to Australia and living in the home again, selling it or simply holding onto the property.
Susan has lived in Singapore for 3 years and rented out her prior home in Sydney. She has decided that she’d like to sell her property and use these funds for alternative investments. Susan has decided to claim this property as her primary residence, and as it is within the 6 year mark, she would not be liable for capital gains tax on the growth of her property.
If your rental property is currently approaching the 6 year mark and you have no intention of living in the property again, you may wish to get a valuation completed to define your capital gains tax cost base. This can assist you a great deal in your own financial planning.
To your financial success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group, division of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to international and local professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is licensed by Global Financial Consultants in Singapore, with a team of Australian-trained, experienced and qualified, allowing us to provide specialist advice to Australians living abroad.
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you. We expressly disclaim all and any liability to any person or organisation, in respect of anything, and of the consequences of anything done or omitted to be done by any such person in reliance, whether whole or in part, upon the whole or any part of the contents of this.