If you acquire a new home before you dispose of your old one, both dwellings are treated as your main residence for up to six months if:
- the old dwelling was your main residence for a continuous period of at least three months in the 12 months before you disposed of it
- you did not use the old dwelling to produce assessable income in any part of that 12 months when it was not your main residence, and
- the new dwelling becomes your main residence.
If you dispose of the old dwelling within six months of acquiring the new one, both dwellings are exempt for the whole period between when you acquire the new one and dispose of the old one.
Example 73: Exemption for both homes
Jill and Norman bought their new home under a contract that was settled on 1 January 2021 and they moved in immediately. They sold their old home under a contract that was settled on 15 April 2021. Both the old and new homes are treated as their main residence for the period 1 January to 15 April, even though they did not live in the old home during that period.
End of exampleIf it takes longer than six months to dispose of your old home, both homes are exempt only for the last six months before you dispose of the old one. You get only a partial exemption when a CGT event happens to your old home.
Example 74: Partial exemption for old home
Jeneen and John bought their home under a contract that was settled on 1 January 1999 and they moved in immediately. It was their main residence until they bought another home under a contract that was entered into on 2 November 2019 and settled on 1 January 2020.
They retained their old home after moving into the new one on 1 January 2020, but did not use the old one to produce income. They sold the old home under a contract that was settled on 1 October 2020. They owned this home for a total period of 7,945 days.
Both homes are treated as their main residence for the period 1 April 2020 to 1 October 2020, the last six months that Jeneen and John owned their old home. Therefore, their old home is treated as their main residence only for the period before settlement of their new home and during the last six months before settlement of the sale of the old home.
The 90 days from 1 January 2020 to 31 March 2020, when the old home was not their main residence, are taken into account in calculating the proportion of their capital gain that is taxable (90 ÷ 7,945).
Because they entered into the contract to acquire their old home before 11.45am AEST on 21 September 1999 and entered into the contract to sell it after they had held it for at least 12 months, Jeneen and John can use either the indexation or the discount method to calculate their capital gain.
End of exampleIf it takes longer than six months to dispose of your old home, you may get an exemption for the old home for the period in excess of the six months by choosing to treat it as your main residence for that period under the ‘continuing main residence status after dwelling ceases to be your main residence’ rule. If you do this, you get only a partial exemption when you dispose of your new home.
Example 75: Partial exemption for new home
The facts are the same as in the previous example, except that Jeneen and John choose to continue to treat their old home as their main residence for the period from 1 January 2020 to 31 March 2020 under the continuing main residence status after dwelling ceases to be your main residence rule.
This means they get a full exemption when they sell it.
Because both homes can only be exempt for a maximum of six months when you are moving from one to the other, Jeneen and John will not get a full exemption for their new home when they sell it. The exemption would not be available for the new home for the 90 days from 1 January 2020 to 31 March 2020.
End of example