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capital gains tax on inherited house

Discussion in 'Accounting, Tax & Legal' started by 181pacific, 19th Nov, 2014.

  1. 181pacific

    181pacific New Member

    Joined:
    19th Nov, 2014
    Posts:
    1
    Location:
    Sydney, NSW
    Hi

    I have questions regarding capital gains tax on the sales of a house I inherited from my mother. In May 2001, my mother purchased a house for $600,000. It had been her primary residence. She passed away in December 2002 (I lived with my mother during that period) and I inherited the house from her according to the will. The value of the house at the time was $670,000. Up until June 2004, the house had been my primary residence.

    However, since 1 July 2004, the house has been rented out and generated rental income for me up until now and during that period I have lived a different property as a tenant. I do not own any other house other than the house I inherited from my mother.

    Now I am considering selling the house and I?ve had conflicting advices.

    My questions are;
    Firstly, I would like to know if I can be exempt from CGT all together for the sale of the house since the house I inherited was the main residence of my mother.

    The ATO website provide the below information about the exemption of CGT to inherited house.
    "If you inherit a house that was the main residence of the person who left it to you, a capital gain on its subsequent disposal may be exempt from tax."
    (https://www.ato.gov.au/General/Capi...ng-CGT-assets/Records-relating-to-inheritance)


    Secondly, if for some reason CGT applies, I would like to know how I can calculate CGT.

    Can I apply the "six-year rule" and claim the house as my main residence for the portion of the period I rented out the house although I did not live in the house? If so, I will be exempt for CGT since the first day I rented out the property for the following six years (i.e. 1 Jul 2004 ? 30 Jun 2010), right?

    Then I calculate the difference between the cost price as at 30 June 2010 and the sales price when I sell the house for the amount of capital gain and then apply the "50% discount" for owning the house for more than 12 months?
     
    Last edited by a moderator: 19th Nov, 2014
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    you can't be exempt as you have be absent for more than six years.

    You will have to apportion it.