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The Family Home, CGT & Your Records: What The ATO Needs To Know

Selling your family home is usually exempt from capital gains tax (CGT). However, your entitlement to a full exemption may vary depending on your circumstances, such as renovations to your home or using it for business or Airbnb.

General records to keep which help to form part of the cost base (used to work out if a capital gain or loss occurs) include:

  • A copy of the purchase contract and all receipts for expenses relating to the purchase.
  • All records relating to the CGT event and all relevant expenses.
  • Records of your costs of owning the property (interest, rates, land taxes, insurance premiums, the costs of repairs).
  • Records of capital expenditure on improvements such as extensions, additions or improvements including initial repairs and maintaining the title or right to the title during your period of ownership.

The following records are necessary for homes used as the main residence:

Your Home

If you use your home to produce income (running a business or renting a room out such as AirBNB) you will need to keep records of different costs depending on when you acquired your home.

For homes acquired on or after September 1985, you should keep records of expenses during the income-producing period and the proportion of the property used to produce income.

If you started using your home to produce income for the first time after 20 August 1996 – you generally need to know your home’s market value at the time you first used it to produce income.

An Inherited Home

Inheriting a home that was the primary residence of the person who left it to you means any capital gain on its subsequent disposal (selling of the home) may be exempt. Until you are sure of the circumstances, keeping records of the relevant costs incurred by you, the previous owner, or their trustee or executor is advisable.

Records do not need to be kept of the previous owner’s costs if you inherited the dwelling after 20 August 1996, the dwelling was their main residence prior to their passing away, and they were not using the dwelling to produce income at the time of their death.

In these circumstances, you will be taken to have acquired the dwelling at its market value at the date of death. If you have not obtained a copy of the valuation report from the executor or trustee, you will need to get your own valuation.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

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David and Alison Parker

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Carl Gillmore

I have used Jane & the team for the last 6 years for all of my business & personal accounting needs. They have always been professional, easy to talk to & available when we have needed assistance.

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Carl Gillmore Landscape

John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier