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For those who run a “small business” and decide to sell it, the various Capital Gain Tax (CGT) small business concessions are invaluable (as has been noted many times before).

Of course, it is great if you can qualify for the “15-year exemption” concession because this will mean that you won’t have to pay any CGT.

But this requires, among other things, that you are aged 55 years or over and are “retiring in connection” with the sale, something that may just not be the case. But if this is not the case, you may still be able to use the retirement exemption to eliminate up to $500,000 of capital gain.

However, if you are under 55 years of age at the time of the sale of the business then any qualifying capital gain must be paid into your super. You cannot take it directly. On the other hand, if you are 55 years or older you can take it directly without having to pay it into super and spend it as you wish.

But like the “15-year exemption” there are a number of hoops to jump through, especially if the capital gain has been made by a company or family trust you control. And these hoops relate to making the payment of the CGT exempt amount to you in the appropriate manner.

As a last resort, you can use the roll-over in the CGT small business concessions to acquire a replacement asset. However, if a replacement asset is not acquired within two years then the capital gain is reinstated and taxed at that time.

But this concession is far more than “a last resort”.

In fact, it is a significant (and acceptable) planning device in its own right. Furthermore, it can be used from the start in relation to the whole of the capital gain so that all its benefits can be fully utilised.

And these benefits include the ability to defer the assessment of the gain for up to two years to, say, allow time for you to turn 55 years of age so that you can then use the retirement exemption to take the capital gain CGT-free.

It can also be used to buy you time to meet other relevant conditions to qualify for the retirement exemption – so that when the rolled over gain is reinstated after two years you can then apply the retirement exemption to your benefit. This may be relevant where, for example, the capital gain was made by a family trust, and you need to find a “controller” of the trust in order to use the exemption.

And if nothing else, the rollover can give you an extra two years just to think what you are going to do about things, including whether just to do the obvious and buy a replacement business asset (of any type) in the meantime.

So, once again, the advice of your accountant is invaluable in the matter of whether to buy a replacement asset or when (and how) it is best to realise your capital gain.

Legislation giving effect to the government’s revised settings for the Stage 3 tax cuts has been passed by both houses of Parliament with the support of the Coalition.

The stage 3 tax cuts changes:

• reduce the 19% tax rate to 16% for incomes between $18,200 and $45,000
• reduce the 32.5% tax rate to 30% for incomes between $45,000 and the new $135,000 threshold
• increase the threshold at which the 37% tax rate applies from $120,000 to $135,000, and
• increase the threshold at which the 45% tax rate applies from $180,000 to $190,000.

A permanent tax saving

Many taxpayers and their advisers focus on timing issues around year-end by deferring income and bringing forward deductions. Legitimate steps can be taken to shift taxable income from one year to the next and most people would prefer to pay tax next year rather than this year. However, any benefit gained reverses in the following year when you have to do it all again just to stand still. It’s a lot of effort for a once-off timing advantage.

The difference with the 1 July 2024 tax rate changes is that reducing your taxable income in 2023-24 and increasing it in 2024-25 (where it is taxed at a lower rate) produces a permanent saving over the two year period – a saving you get to keep. That may make such timing issues worth another look.

How much can you save?

That depends on your where you sit on the income scales and how much taxable income is shifted. Very high income earners will have a marginal tax rate of 45% regardless of whether they shift income and deductions around, and those on lower incomes don’t pay much tax to begin with, so their potential savings are less.

But for anyone who expects to fall in the taxable income range of $120,000 to $135,000, for example, there is a permanent saving of 7% on up to $15,000 in taxable income that is shifted from 2023-24 into 2024-25.

Take someone in that income range who owns a rental property which is in need of a $15,000 paint job and who was planning to get it done by Christmas. They could save themselves $1,050 by arranging to have the job done in May or June. Not a fortune, but not chickenfeed either.

So, how can you go about shifting taxable income into 2024-25?

Before looking at various options, it is necessary to point out that the tax laws include anti-avoidance rules that prevent tax planning strategies which have as their sole or dominant purpose the gaining of a tax advantage. However, if you are simply bringing forward ordinary business-related purchases that you would have made anyway, those rules are unlikely to be triggered. To make certain you stay on the right side of the tax rules you should check with us before taking any action.

Bringing deductions forward

Subject to that necessary reservation, and depending on your expected taxable income, bringing deductions forward into the 2023-24 income year offers the widest range of options for achieving a permanent tax saving. Bear in mind that bringing purchases forward does involve an earlier than planned cashflow impact that you would need to fund. Options include:

Rental properties

If you have a rental property that is in need of any sort of maintenance or repairs, why not get on to it now? You’ll be bringing the deduction into 202324 and keeping your tenants happy at the same time. There can sometimes be a fine line between repairs (deductible immediately) and improvements (deductible over time). We can help you sort out which is which.

Gifts and donations

If you have a tradition of gifting and donating, maybe to telethons and appeals that occur later in the year, consider making those donations to the charities before the end of June 2024. Charities are more than happy to receive donations at any time of the year, and if the taxman can give it an extra boost, why not? Double check that your chosen charity is a deductible gift recipient.

Superannuation

Consider making after-tax contributions into your super fund. But be mindful of contribution caps and the additional 15% tax on contributions made by high income earners. You should seek financial advice prior to taking any action.

Sole traders and partnerships

Do you have a small business which you operate through your own name or in partnership?

Consider some of these possibilities:

• Depreciation: Could you do with a new laptop or other tools and equipment? Or even a modest motor vehicle? Legislation that is expected to pass Parliament before 30 June 2024 will set the small business threshold for claiming an outright deduction for the cost of depreciating assets to $20,000. If you’re planning to make these purchases anyway, you would be better off with that sort of deduction falling into the 2023-24 year where the tax rate is higher. So consider paying a visit to JB Hi-fi, Bunnings or the nearest car yard and start looking around.
• Bad debts: Have a receivable you know isn’t going to pay, but you just haven’t wanted to admit it?
  Consider writing it off and take the deduction now. But remember, the debt must be more
  than simply doubtful and there are certain other requirements which must be met. We can help you with those.
• Obsolete stock: Is that box of polaroid cameras really going to move anywhere other than to a museum? Write it out of stock before 30 June 2024 and take the deduction.
• Bring forward deductible expenses: Buying two boxes of printer paper? Buy three instead. Stock up on printer ink, you never know when you’re going to have that big print run you hadn’t anticipated.
  Consider what other consumables you use and stock up for your short-term needs before 30 June 2024.
• Prepay deductible expenditure: All taxpayers are entitled to claim deductible prepaid expenditure where the expenditure is below $1,000 (excluding GST) or the expenditure is required by law (e.g., car registration fees). Where the expenditure is $1,000 or more, small business entities can deduct the full amount of prepaid expenditure if it relates to a period of 12 months or less. Note that this is also available to non-business expenditure of individuals (e.g., work-related expenses or rental property expenses).
• Employee bonuses: Confirm commitments to pay employee bonuses are made by 30 June 2024,
  and don’t forget that PAYG withholding must be withheld when the bonuses are paid.
• Skills and training: Take advantage of the small business entity skills and training boost before it ends on 30 June 2024. The Boost enables small businesses to deduct an additional 20% of expenditure that is incurred for the provision of eligible external training courses to their employees by registered providers in Australia.
• Energy incentive: Take advantage of the small business entity energy incentive which provides a bonus deduction of 20%. Eligible assets include heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage. Eligible assets or upgrades will need to be first used or installed ready for use by 30 June 2024.

Note: this incentive is provided for in the same Bill as the $20,000 instant asset write-off provisions, which is currently before Parliament and is expected to pass before 30 June 2024.

Deferring income

Options for shifting income into the 2024-25 year are more limited, but include:

Salary sacrifice

Consider salary sacrificing into super before 30 June 2024. As mentioned above, be mindful of the contribution caps, the additional tax for higher income earners and seek financial advice before taking any action.

Interest

Ensure term deposits mature after 30 June 2024

Most people look forward to retirement as it is a chance to finally take time to relax, enjoy life and do things they never had time for when they were working. But sometimes things change and some people feel the urge to return to work. If a return to work is inevitable, it is important to understand the superannuation retirement rules when it comes to working and accessing your superannuation. 

Introduction 

Many new retirees find that after a few months the novelty of being on ‘permanent vacation’ starts to wear off. Some people may miss their sense of identity, meaning, and purpose that came with their job, the daily structure it brought to their days, or the social aspect of having co-workers. 

In fact, figures from the Australian Bureau of Statistics (ABS) have revealed financial necessity and boredom are the most common factors prompting retirees back into full or part-time employment1 . As such, it is not uncommon to want to return to work after retirement, even if only on a part-time or casual basis. Whatever your reasons or motivations might be, there are a range of factors to consider if you wish to return to work depending on your age. 

There are three ways in which you can retire, access your superannuation and then return to work, which are summarised below. 

1. Retire on or after reaching preservation age

Individuals can retire after reaching their preservation age , ending gainful employment and  declaring that they intend never to return to any ‘gainful employment’ for 10 hours or more each week. 

 It is illegal to access your superannuation with a false declaration of intention so your intention to retire must be genuine at the time. This is why your superannuation fund may require you to sign a declaration stating your intent.

That said, you can return to work while still accessing your superannuation as long as your intention to retire at the specific time was genuine and that you didn’t plan to return to work all along. Your intentions are allowed to change even though you may have retired and have already accessed your superannuation or are receiving age pension payments.

 2. Ceasing an employment arrangement after age 60

 From age 60, you can stop an employment arrangement (ie, resign from a job) and obtain full access to your superannuation without having to make any declaration about your retirement or future employment intentions.

 If you are in this situation, you can return to work without any issues because there was no requirement for you to declare your retirement permanently. For example, you could resign from a job with one employer and start work with a different employer and access your superannuation.

3. Retire after age 65 or older 

Once you turn age 65, you can access your superannuation regardless of your work status and do not need to make any declaration about your retirement status. You only need to be retired if you want to access your superannuation before you turn age 65. 

Whether you are accessing your superannuation or not, you can return to work at any time. 

Your super after returning to work 

Regardless of what age category you fall into, you may have taken your superannuation as a lump sum, income stream or a combination of both. If your circumstances change and you return to work, any amounts in your superannuation fund, including any pension payments you may be receiving will remain accessible and can continue to be paid. 

However upon recommencing any future employment, any future superannuation contributions and earnings from subsequent employment and any voluntary contributions will remain preserved until a further condition of release is met, such as retirement or reaching age 65.

Impact on age pension 

If you are receiving the age pension and decide to return to work, your employment income will count towards Centrelink’s income test which may impact your age pension entitlements. 

Having said that, Centrelink has a ‘Work Bonus’ scheme which reduces the amount of your employment income, or eligible self-employment income, which Centrelink applies to your rate of age pension entitlement under the income test. Fortunately, you don’t need to apply for the Work Bonus, rather Centrelink will apply the Work Bonus to your eligible income if you meet all the eligibility requirements. All you need to do is declare your income.

If your intentions or circumstances have changed and you have decided that you would like to return to work, contact us if for a chat about your options

Have you reached preservation age and still have a mortgage? If so, you may be able to use your super to deal with your rising mortgage repayments if you meet certain conditions.

Introduction 

The constant increase to interest rates over the last two years have left some borrowers strapped for cash. Fortunately, those that have reached preservation age can access their superannuation via a special type of pension, known as a transition to retirement (TTR) pension, even if they haven’t retired. 

What is preservation age? 

Your preservation age is the earliest age you can access your superannuation. The preservation age that applies to you depends on your date of birth and ranges from age 55 to 60, as shown in the table below. Alternatively, you will also reach preservation age when you reach age 65, even if you are still working.

What is a TTR pension?

A TTR pension allows you to supplement your income by allowing you to access some of

 your superannuation once you’ve reached your preservation age. You can start a TTR pension by transferring some of your superannuation to an account-based pension (ABP), which is a regular income stream bought with money from your superannuation fund.

Once you start a TTR pension, you need to withdraw payments between a minimum and maximum range each year. The minimum drawdown rate depends on your age and is 4% for those under 65 years old. The maximum amount you can withdraw is 10% of your account balance as at 1 July of each financial year (or 10% of the value from the date your TTR pension started in that financial year). This means you can choose pension payments anywhere between your minimum and maximum payment  limit each year.

But note that a TTR pension does not allow you to withdraw your superannuation as a lump sum. This can generally only be done once you’ve reached your preservation age and met certain conditions of release, such as retirement.

TIP 

If you commence a TTR pension halfway through the year, the minimum payment percentage is pro-rated to reflect the number of days the pension is in place in that first financial year. The minimum will be recalculated at 1 July based on your TTR pension balance and your age at that time to factor in a whole year’s worth of pension payments.

Example

 Justine is 60 years old and has $650,000 in superannuation. Justine’s adviser recommends she commences a TTR pension with $600,000 to help ease her financial difficulties. Justine must draw a minimum of $24,000 (ie, 4% x $600,000) or up to a maximum of $60,000 (ie, 10% x $600,000) in pension payments in the 2023-24 financial year.

 Justine can use the additional TTR pension payments to help supplement her employment income and meet her mortgage repayments.

 She could also use a TTR pension as a strategy to pay down her mortgage much quicker than planned even if she could easily afford her repayments.

 Factors to consider

• If you are 55 to 60, the taxable amount of your income from your TTR pension is taxed at your marginal tax rate, less a 15% tax offset.
• Once you turn 60, your TTR pension payments are all tax free.
• Any investment earnings generated from your TTR pension are subject to the same maximum 15% tax rate as superannuation accumulation funds.
• Once you reach age 65 or retire, your TTR pension will automatically convert to an ABP. This means more flexibility as the 10% maximum pension limit will no longer apply.

 Need help?

 You should seek financial advice before deciding if a TTR pension is right for you as it could help you understand the possible benefits and implications for your particular circumstances.

Collectables

 Capital gains tax does not just apply to “big ticket” items such as real estate, farms and shareholdings.

 It also applies to a special class of assets known as “personal use assets” and, in particular, those personal use assets known as “collectibles”.

 “Collectables” are specifically defined under the tax law to mean the following items that are “used or kept mainly for your personal use or enjoyment”: 

• artwork, jewellery, an antique, or a coin or medallion; or
• a rare folio, manuscript or book; or
• a postage stamp or first day cover.

However, for an asset to be a collectable, it must have cost more than $500. Otherwise, collectables acquired for $500 or less are exempt from CGT (but subject to important rules to get around or avoid this threshold test).

 However, the most important rule about a collectable is that if you make a capital loss on selling or disposing of a collectable, that capital loss can only be offset against capital gains from other collectibles.

 It cannot be offset against the capital gain from, say, shares or real estate, and nor can it be offset against your other income.

 Furthermore, that jewellery you inherit from your mother will retain its “character” as a collectable (if it was acquired by her after 20 September 1985). So, this too is something to be aware of.

Personal use assets

As for “personal use assets” per se (ie assets used for personal use or enjoyment which are not “collectables” – such as furniture, clothing, pianos etc) they are only subject to CGT if they cost more than $10,000. More importantly, however, is that you cannot claim a capital loss made on a personal use asset.

 But is it a business?

 Finally, of course, it is often the case that a person who owns such collectibles does so for the purpose of trading in them. In this case, the CGT rules take a backseat to the fact that the profit from such activities is assessable in the same way as ordinary income, as if you were operating a business.

If you find yourself dealing with such items, it is necessary to get good tax advice on the matter. 

From bushfire relief groups, sporting clubs, environmental groups, charity associations and many more, volunteers are an indispensable workforce and support network for many organisations. For most, if not all, having volunteers ready to lend a hand is pivotal in them being able to function or survive.

Given that there are many hundreds of volunteers propping up all sorts of good works throughout the nation, and in the spirit of thorough tax planning, an important practical consideration for many may be if payments to volunteers constitute assessable income and whether their expenses are tax deductible. 

WHAT’S A VOLUNTEER? 

There is no common law definition of “volunteer” for tax purposes, although it typically means someone who enters into any service of their own free will, or who offers to perform a service or undertaking. A genuine volunteer does not work under a contractual obligation for remuneration, and would not be an employee or an independent contractor.

Volunteers can be paid in cash, given non-cash benefits or a combination of both – payments include honorariums, reimbursements and allowances. Generally, receipts which are earned, expected, relied upon and have an element of periodicity, recurrence or regularity are treated as assessable income. 

Conversely, where a person’s activities are a pastime or hobby – rather than income-producing – money and other benefits received from those activities are generally not perceived as assessable income. 

The examples below shed light on whether typical payments such as honorariums, reimbursements and allowances constitute assessable income.

IS AN HONORARIUM ASSESSABLE INCOME? 

An honorarium is either an honorary reward for voluntary services, or a fee for professional services voluntarily rendered, and can be paid in money or property. 

Example 1 

Q: Alex works as a computer programmer at the local city council and volunteers as a referee for the local rugby union. This year he organised an accreditation course for new referees. He applied for a grant, arranged advertising, assembled course materials, and booked venues. Alex is awarded an honorarium of $100 for his efforts. 

A: No, the honorarium is not assessable income as honorary rewards for voluntary services are not assessable as income and related expenses are not deductible.

Example 2

Q: Mindy has an accounting practice and volunteers at the local art gallery. Mindy prepares the gallery’s annual report using her business’s software and equipment. At the gallery’s annual general meeting, Mindy is awarded an honorarium of $800 in appreciation of her services.

A: Yes, this honorarium constitutes assessable income because it is a reward for services connected to her income-producing activities.

 IS A REIMBURSEMENT ASSESSABLE INCOME?

 A reimbursement is precise compensation, in part or full, for an expense already incurred, even if the expense has not yet been paid. A payment is more likely to be a reimbursement where the recipient is required to substantiate expenses and/or refund unspent amounts.

 Example 3

Q: Matthew is an electrical contractor. He volunteers to mow the yard of a local not-for profit childcare centre. Matthew purchases a $15 spare part for the centre’s mower. The childcare centre reimburses Matthew for the cost of the spare part.

A: No, the $15 reimbursement is not assessable income because Matthew has not made the payment in the course of his enterprise as an electrician.

 Example 4

Q: Rose has a gardening business. She volunteers to prune the shrubs of a local nursing home and uses materials from her business’s trading stock.

A: Yes, any reimbursement she receives for the cost of the materials is assessable income because the supplies were made in the course of her enterprise.

IS AN ALLOWANCE ASSESSABLE INCOME?

 An allowance is a definite predetermined amount to cover an estimated expense. It is paid even if the recipient does not spend the full amount.

Example 5

Q: Andy volunteers as a telephone counsellor for a crisis centre. He is rostered on night shifts during the week and is occasionally called in on weekends. When Andy works weekends, the centre pays him an allowance of $150. The allowance is paid to acknowledge Andy’s extra efforts and to compensate him for additional costs incurred.

A: Yes, these payments to Andy are considered assessable income because he received the allowance with no regard to actual expenses and there is no requirement to repay unspent money.

EXPENSES INCURRED BY VOLUNTEERS

On the tax deductibility of volunteer expenses, a volunteer may be entitled to claim expenses incurred in gaining or producing assessable income – except where the expenses are of a capital, private or domestic nature.

For instance, expenditure on items such as travel, uniforms or safety equipment could be deductible, but expenses incurred for private and income producing purposes must be apportioned – with only the income-producing portion of the expense being tax deductible.

Example 6

Q: Robert operates a commercial fishing trawler and uses navigational charts in his business. He also volunteers as an unpaid training officer at the volunteer coastguard. Robert purchases two identical sets of navigational charts – one for his business, the other as a training aid in coastguard courses.

A: Yes, Robert can claim the part incurred in gaining or producing assessable income – in this case, half the total cost.

WHAT ABOUT DONATIONS? ARE THESE DEDUCTIBLE?

 It is also common for volunteers to donate money, goods and time to not-for-profit organisations. To be tax deductible, a gift must comply with relevant gift conditions, and:

• be made voluntarily
• be made to a deductible gift recipient, and 
• be in the form of money ($2 or more) or certain types of property.

 Donors can claim deductions for most, but not all, gifts they make to registered deductible gift recipients. For instance, a gift of a service, including a volunteer’s time, is not deductible as no money or property is transferred to the deductible gift recipient. However, individuals may be entitled to a tax deduction for contributions made at fundraising events, including dinners and charity auctions.

Example 7

 Mila buys a clock at a charity auction for $200.This is not a gift even if Mila has paid a lot more than the value of the clock. Payments that are not gifts include those to school building funds as an alternative to an increase in school fees and purchases of raffle or art union tickets, chocolates and pens.

Example 8

Clive receives a lapel badge for his donation to a deductible gift recipient. As the lapel badge is not a material benefit or an advantage, the donation is a gift.

Consult our team for more information on which volunteer payments are considered assessable income and which expenses are typically tax deductible.

Unfortunately our financial institutions have not always acted as ethically as we consumers would like.

Whether you’ve received bad advice or paid for advice you didn’t receive at all, our supervisory and regulatory bodies have sought not only to improve the system so it won’t happen again, but also to ensure that if you are on the receiving end of such bad behaviour, you could be entitled to receive financial restitution.

If you’ve recently received a compensation payment, you might be wondering whether you need to pay tax on it.

The answer is – it depends!

It depends on how your investment was held1 and the type of compensation you received.

For example, if you’ve disposed of the investment and previously reported a capital gain in your income tax return, your compensation payment increases the capital gain (you may be able to claim the 50% discount too if you held the investment for more than 12 months). You may need to amend your income tax return to include this additional capital gain.

If you haven’t yet disposed of the investment,and you hold it as a capital investment1 , then the compensation payment reduces its cost for when you dispose of it in the future (make sure to keep details of the compensation payment with your tax records to provide to us later).

Where your compensation payment includes an amount that is a refund or reimbursement of adviser fees, and these fees were previously claimed as a tax deduction by you, then the amount you received as a refund or reimbursement will generally be taxable to you in the income year you receive it. Similarly, any part of the payment that represents interest should also be included in your tax return in the year you receive it.

If you’ve received an amount of compensation and not sure whether it is taxable, or if you need to amend a prior year tax return for a payment you received, please reach out to us.

Whilst the ATO went out of its way to assist businesses doing it tough during the COVID lockdowns, a more robust approach to collecting outstanding tax debts now seems to be the order of the day.

Other people’s money

A major part of the tax debts of many businesses represents the temporary withholding of other people’s money – employees’ PAYG withholding and their superannuation guarantee amounts. And the GST the business charges on the taxable supplies it makes doesn’t belong to the business either.

Some clients avoid mixing their own money and other people’s money. They have opened a separate BAS bank account for the withheld amounts so that those funds will be available when required, regardless of what happens in the business.

Director Penalty Notices

The ATO is particularly focused on employee entitlements and will not hesitate to issue Director Penalty Notices (DPNs) where there has been serious non-compliance by corporate entities.

Under a DPN, the sins of the company are visited on the directors, who will each be personally liable for any unpaid amounts.

As DPNs are a complex and serious matter, please contact us urgently should you receive one.

Disclosure to Credit Reporting Bureaus

One relatively recent development is the disclosure by the ATO of outstanding tax debts exceeding $100,000 to the various Credit Reporting Bureaus, which in turn could have an adverse impact on a business’ future ability to obtain finance. The ATO will contact the business ahead of making such a disclosure to give them an opportunity to set things right.

Simplified debt restructuring

Another relatively recent option, effective from 1 January 2021, is a less formal restructuring option for small incorporated businesses experiencing financial stress. Simplified debt restructuring is open to businesses with total debts of up to $1 million where the business has not undergone a restructure or a simplified liquidation in the last seven years. To be eligible, their current employee entitlement obligations and tax lodgements all have to be up to date.

The process involves appointing a small business restructuring practitioner (SBRP) and devising a plan setting out how much creditors would be paid under the plan if implemented. Creditors then vote on the plan, which is implemented if approved. The ATO is often the major unsecured creditor in these matters, and we understand they have been quite open to approving many of the restructuring plans put forward.

The advantage of this method is that the directors continue to run the business throughout the restructuring process, subject to seeking the consent of the SBRP for any transactions falling outside the normal course of business.

In the meantime, there is a moratorium on the enforcement of debts by unsecured creditors and some secured creditors, while any personal guarantees given by a director or their spouse cannot be enforced except with leave from the court.

In order to qualify, a company has to be insolvent, or about to become insolvent. However, the core business has to be viable, or there would be little point in a restructure. This requires a realistic assessment of how the business is currently performing and what its future prospects are. If the core business is unviable due to industry changes, liquidation may be a more realistic option.

A number of small businesses have applied this option and successfully repaid debt on a compromised basis, emerging from an approved restructuring plan unburdened by unsustainable debt.

Although the economic environment remains challenging, businesses with tax debts they have trouble meeting need to approach the ATO to explain their problems and settle on a payment plan that is adhered to. If you wish, we can help you construct a payment plan to put to the ATO.

The CGT exemption for a person’s home is only available in respect of one home owned at any given time. In other words, you can’t get two main residence exemptions applying to two different homes at the same time.

However, there is one exception to this rule – and that exception applies where a person has bought a new home before selling the old one. In this case, both homes can be entitled to the main residence exemption for an “overlap” period of up to six months.

But if the homeowner takes longer than six months to sell or dispose of the original home, a partial exemption will apply to one or other of the homes for the period in excess of six months. Generally, this will be the home that wasn’t the person’s main residence during this “excess period”.

However, a number of important conditions must be met in order to be able to use this concession in the first place – and this is where the guidance of your tax adviser is needed.

There is another important “overlapping” area in which the principles of not having two CGT-exempt main residences at the same time applies, and that is where “spouses” may have different main residences at the same time. Typically, this maybe where one spouse lives in their country or coastal home, while the other lives in their apartment in the city or interstate for work purposes (on a weekly or monthly basis, say).

But it also importantly includes the case where a couple start living together in a married or de-facto relationship, while one of the spouses retains their existing home and rents it (and therefore can apply a CGT concession to continue to treat it as their home).

Where this type of situation occurs there is a special rule that applies. The spouses must either:

• choose one of the homes to be the CGT-exempt main residence of both of them for this period; or
• each must choose the respective homes in which they live as their main residence – in which case generally they will each only get a half exemption on the home they choose for that overlap period.

These rules are complex and depend on a range of matters including the legal interest each spouse holds in each home, the use of any CGT concessions and, in certain cases, the thorny issue of whether the parties are in fact “de-facto” partners. Suffice to say, professional advice is very much needed in this type of situation.