Capital Gains Tax

Parent Liable to Capital Gains Tax on Half-Share of Townhouse.

An individual has been unsuccesful before the Australian Appeals Tribunal (AAT) in aruging that he should not have to pay Capital Gains Tax on the sale of a Townhouse he owned jointly with his son because, he argues, he was only holding his interest in the property to protect his inexperienced son from selling it on a whim.

The individual had purchased the property for his adult son to live in and transferred the property to himself and his son as joint tenants. After living in the townhouse for a few years , the son moved out to another property. The townhouse was then sold and all of the funds were used to pay down the mortgage on a new property.

The individual argued that he received no proceeds from the sale and that he held his interest in the property in trust for his son, or alternatively, that an exemption under the CGT law should apply.

The AAT did not accept the arguments and held that as a joint tenant the individual was liable to CGT on 50 per cent of the net capital gain on the sale.

Residency Requirement for CGT Home Exemption Failed

The Administrative Appeals Tribunal (AAT) has denied an individual’s claim that an exemption from capital gains tax (CGT) should apply to a property that he and hisĀ ex-de facto partner had sold. The individual has purchased land in 2002 with his then partner, and construction of a house on the land commenced in April 2004. However, the couple ended their relationship in September 2004.

Despite this, the individual argues that they had moved into the house in around May or June 2005 to meet the requirements under the law to sell the property without being subject to CGT.

The AAT found that the evidence before it failed to establish that the house became the individual’s main residence “as soon as practicable” after construction was completed, and failed to establish that the house continued to be his main residence for at least three months after that. In this case, both requirements had to be met in order for the exemption to apply.

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