Capital Gains Tax – Renting Part of the Family Home

There’s been considerable publicity in recent months about the housing shortage and the high cost of rental accommodation. As a result, some commentators have suggested that home owners (especially baby boomers) should consider renting rooms or sections of their large houses to Australians who are in need of accommodation. 

That sounds like a sensible idea. But you need to be careful, lest you create an unexpected tax liability.

As a general rule, there is no Capital Gains Tax (CGT) liability on a gain derived from the sale of a property which has been used as the owner’s main or principal residence. This tax break has encouraged substantial investment by Australians over many decades in “family homes”.

However, what many taxpayers don’t appreciate is that a CGT liability may arise on part of a capital gain where the owner still lives in their main residence while using a section of it for rental or for the purpose of operating a business.

Each circumstance is different, so you shouldn’t jump to conclusions. If you’re in any doubt about your tax position, we recommend consulting the ATO website (as a minimum). There is a detailed explanation on the ATO website.

You should also consider speaking with a qualified accountant/tax agent to make sure you understand your position.  Which may be found on these sites:

• Chartered Accountants ANZ
• CPA Australia
• Tax Practitioners Board