Question

Question 2

Explain the main residence exemption. In your answer comment on the following:

1. What are the factors that are relevant in determining main residence status
2. What can happen if you are absent from your property
3. What will happen if you own two properties for a period of 4 months (ie. You have moved house and your old house is on the market and not being used for income producing activities)

this question is about tax in Australia

Answer 1

a) Relevant factors in determing residential status-

1. Individual's Intentions

2. family / Business/ Employment ties with Australia

3. Social & Living Arrangements

4. Location of the Individual's Assets

b) Things that might happen if you are absent from your property-

1. The house stops being main residence for the period of his absence.

2. If it is used to produce income and a person choose to treat it as a main residence for upto 6 years after he stop living in it, the property is fully exempt, the 'home first used to produce income' rule does not apply.

3. If the person rent out the property for more than 6 years, the 'home first used to produce income' rule does apply.

4. If you are absent more than once during the period you own the property, the six year maximum period that you can treat it as your main residence while you use it to produce income applies seperately to each period of absence.

5. If you use any part of your property to produce income before you stop living in it, you can't apply the continuing main residence exemption to that part.

c) If a person has 2 properties for a period of 4 months then he will eligible to get exemption certificate for the property later purchased as he has 2 properties for a period of less than 12 months and no property is used in producing activities.