I bought a new house 12 months ago and, after moving, placed the old one on the market. The house has not yet sold and has not been rented out. When it finally does sell, will I have to pay capital gains tax given it's no longer my principal dwelling?
Julia Hartman from BAN TACS points out that this is a trap in the CGT legislation. You are allowed only a six-month overlap backdated to the last six months before you sold your old house. Further, there is no resetting of the cost base to the market value when you first moved out because that section requires it to become income-producing. So you are stuck with a choice to expose to CGT your new house, or your old house for six months. The one you choose to expose will have to have its capital gain calculated for the whole period you owned it and then apportioned between days covered with your main residence exemption and days that aren't. If you bought the house after August 20, 1991, you will be entitled to increase the cost base by anything associated with holding it. This even includes maintenance such as cleaning and lawn mowing.