renting out your home while working overseas

Tax advantages of renting out your home while working overseas

Do you own a home in Australia but are about to move overseas for work? If you find yourself in this situation, you are probably in the process of deciding whether you should be renting out your home while working overseas.

The good news is that if you do decide to rent out your primary residence while you are overseas, then you can find yourself with a tax advantage.

Capital gains tax

Generally, if you move out of your home, you cannot still claim it as your main residence. This means you may have to pay capital gains tax on the property if you decide to sell it further down the line, which can come at a huge cost to your property profits from the sale.

However, there’s a rule that states that if you are temporarily absent from your main residence for a period up to 6 years, then (as long as you don’t have another main residence), your home will remain eligible for the main residence capital gains tax exemption. In short this means, that even where you rent out your property whilst you are away, the property will continue to be classed as your main residence, and will not be subject to capital gains tax under the main residence exemption. Great news!

Interestingly, if you rent out the home for less than six years, you are able to return to the home once more to live in it, citing it as your main residence once more and avoiding the capital gains tax if you sell within the six years.

Capital gains tax discount

If you decide to become an expat somewhere in the world and you return before the six years is up, moving back into your Australian home, you can receive a hefty discount on your capital gains tax if you decide to sell after 12 months.

Your capital gains tax bill will, in fact, halve if you claim the home as your main residence again for a year before selling.

However, if you sell within the six years of the home being rented out, then you will avoid the capital gains tax altogether, but only if you haven’t nominated any other home in Australia as your main residence during this period.

When the six-year rule doesn’t apply

If you choose not to earn an income from your home while you’re away – as you might decide to leave it vacant or let a family member live in it for free – then the capital gains tax-free threshold will apply for an unlimited period, no matter whether you are living in the residence or not.

If you own more than one residence in Australia, you need to determine which dwelling is your main residence and let the tax office know. Thankfully, you only need to make this decision at the end of the tax year when you file your Australian tax return.

Photo: Tax by Phillip licensed under Creative commons 2
Shane Macfarlane
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Shane Macfarlane

CEO & Founder at Expat Tax Services
Shane's an Australian Chartered Accountant and Australian expat tax specialist who's also an expat himself (based in Asia).Shane's passionate about tax and legitimate tax minimisation, particularly as it relates to Australian expats who are often subject to high rates of tax back home in Australia.Beyond tax and accounting, Shane's an entrepreneur, having devised, created and founded a successful accounting startup, Fifo Workpapers (acquired by accounting software giant, Intuit inc. in 2013)

In short Shane's a tax and software techno-geek, who recognised that Australian expats were unable to obtain the specialist advice and quality service, that they needed from their accountants. Accordingly, Shane founded Expat Tax Services to provide Australian expats with access to specialist, quality advice at fair and reasonable prices (no hourly rates, fees quoted upfront with unlimited support included) . . . receive the support and advice you need without having to take second-mortgage to pay your accountant's bill! Speak to Shane & the team today.
Shane Macfarlane
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