So if this 1 year rule (or 6 months rule) actually exists, how come there's no reference to it anywhere on the ATO site? Also, I've spent several hours now going over all the info I can get from other internet resources and I can't find any official reference to a "one year rule" (meaning you must live in the house for a minimum of one year). I've already made an appointment to get legal advice, but that's in 2 weeks time.

Someone else told me an hour ago that yes, I need to be there for one year.

Is this "one year rule" just urban folklore?

Can someone please direct me to an internet site that clearly sets out and explains this "one year rule"? Thank you.

Dear Smithy456,

I'm not a tax agant, just a very knowledgable person ;) .

You should still see a tax agent even though you can take it from me you will not be up for Captial Gains Tax.

As you said it was your principal place of residence, I'm assuming under 2 hectares, it is the only house you own, and you haven't made a habit of turning houses over in the last few years, your laughing.

Those giving you contrary advice are getting confused with the 50% CGT exemption rule which states you must hold an asset for over a year to apply for the halving of the due CGT rate (something brought in by the Howard government which I personally consider a scam for the high end of town) be it shares or property.

The tax office has access to stamp duty records and uses those to filter for suspicious buying and selling. The important thing is your intent. As long as you are able, if you are asked, to show your intent was to live in the house as a principal residence then it doesn't matter how long you have held it before selling it, even if it was a few weeks.

If however the tax office deems that your intent when buying was to reap profit through a quick sale you could well be in strife. They are a lot more likely to ask if you have held several properties for short periods of time and sold them for profit.

I hope this assuages any stress you might be feeling.

The bill is in the mail.

*for the halving of the due CGT rate (something brought in by the Howard government which I personally consider a scam for the high end of town) be it shares or property.*

Err no scam there Csteele. When Keating brought in the CGT, he
indexed values for inflation, which is of course only fair. For
a dollar invested 10 years ago, would have lost about 40% of its
real value.

Some people had trouble with the calculations, so Costello simplified
the system, by halving the CGT rate, but removing the indexation
rule. So if you work it out over a number of assets, it kind
of balances out and is no scam at all.

Dear Yabby,

Sorry but no dice.

I could have been specific, and said it was a scan for the speculating high end of town (note I think one of the reasons indexing should be reinstated is the current system favours short term investments over the long term).

But there is also the issue of executive pay being partially in shares. We are told it is to give greater incentive to work to raise share prices but really it is a tax advoidance measure sometimes saving departing executives a third of their tax bill.

If I was to pull a $5,000 bonus for a years work I will pay tax on that, as I should, at my top rate. If I were to earn the same from the sale of shares that I had held for just over 12 months it would be half that.

In my opinion it erodes our system of progressive taxation, drives short term speculation and is a rort for the most highly paid in our economy.

It should be remembered that the top one percent of taxpayers receive nearly 40% share of capitial gains revenue in this country and the top 10% receive nearly 70%.

Also someone on the top marginal rate of 46.5% gains a 23% tax rebate while a person on the bottom recives nothing.

The 50% rule is one of the primary inequities in our current tax system and is in urgent need of reform.

Bring back indexation

Yabby "Some people had trouble with the calculations, so Costello simplified
the system, by halving the CGT rate, but removing the indexation
rule. So if you work it out over a number of assets, it kind
of balances out and is no scam at all."

I agree with you Yabby, that is exactly what happened.

When the prevailing rate of CGT was levied on only half the gain, instead of all the gain, it was because the indexation to CPI (which is what Keating operated with) was removed.

Thus as you say, the net differemce was about zero, in terms of ATO GCT receipts.

scteele "The 50% rule is one of the primary inequities in our current tax system and is in urgent need of reform."

barely.....

By their very nature, "capital gains" differ from "income gains". Treatment of the two does not need to be "uniform" in their levying or rate.

If you wanted to address "inequities" I suggest you look at not how tax is generated but how it is spent... bribes for pregnant women, extra subsistence for special groups....

those are the real "inequities"

but I would agree with you, the whole Tax system is a mess whic needs cleaning up... by eliminating special exemptions and special interests and maybe getting rid of stupid taxes like FBT and the state taxes which were supposed to be revoked when GST was introduced.

*It should be remembered that the top one percent of taxpayers receive nearly 40% share of capitial gains revenue in this country and the top 10% receive nearly 70%.*

I guess this ignores the tax free capital gains that most people
make on their houses, which would not be included in the figures,
nor the capital gains on super fund investments, which are credited
to the super funds.

The thing is, I explained to you why Costello introduced it, for
good logical reasons, as at the time there was much outcry that
filling out a tax form was too complicated.

If CEOs have now developed a scam to take advantage of that law,
that is quite possible, but that happened long after the event.

To me it makes little difference as to which system is used, as
long as inflation is allowed for. My big complaint is that with
retail deposits, savers are effectively being screwed by inflation
and taxation, so our savings rate remains very low in this
country and banks need to go offshore for their money, to a large
degree.

Funnily enough some commentators are against any change, saying
it would be too hard to calculate. I can hardly see the logic
in that, for the alternative is that they just keep screwing us.