CGT on PPOR if rented

Question

My PPOR is avaialble to rent as a holiday house via a real estae agency with a management agreement in place. I am using the 6 yr rule. i want to use the house for 3 weeks and I beleive i won’t be liable for CGT on the personal use portion if it is not avaialble for rent during the time i use it. What exactly do i have to do to make it "not avaialble for rent". The intention is for the PPOR to be available for rent again following my stay.

Answer

Section 118-145 exempts a property that was once your main residence for 6 years while it is earning income and if you move back in and make it your home again you can start the clock again on the 6 years. If the property is not earning income then the period it can be covered by your main residence exemption during your absence is infinite.

Now moving back in for a holiday is not going to reset the 6 year clock because you are not making it your home. Nevertheless it is not earning income during that time so those 3 weeks do not contribute to the 6 year count.

Your main concern should be that expenses for the period you stay there are not deductible so there will need to be an apportionment of interest rates etc. You should be right because it is only 3 weeks but if you say used it all the school holidays then the ATO would be inclined to argue that the periods of vacancy were not deductible because it was primarily private use.

Now that I have pointed out all the issues that concern me. Here is a direct answer to your question. Simply advise the agent that you will be using it during that period.

If you are using your main residence exemption to cover another property then you can’t use 118-145 anyway and staying in it for 3 weeks will not move your main residence exemption across to the holiday home for that period. Even if it did you would not want that result because it would leave whatever property you are currently covering with your main residence exemption, exposed to CGT.

I find the wording of your question a little confusing so if I have not answered what you were asking please let me know.

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