Q&A
Denise wants to sell her home but now she can’t sleep at night
Capital gains tax may not be as scary as $500k
Q I find it difficult to sleep at night because I worry about my future tax obligation as regards my family home. With the proceeds of my divorce settlement, I bought a home for me and my two daughters on Sydney’s northern beaches in 2005 for $725,000. In 2015 I inherited $350,000 from my mother. My daughters had left home, and I was 64, working full-time and thinking of retiring. This option was not looking very attractive due to the sorry state of my superannuation balance. Consequently, I came up with the brilliant idea of using my inheritance to put a second storey on my house, which I would move into while renting out the bottom floor.
In 2017, a lovely family moved in. The rental income – which I declare and pay tax on – has given me a wonderful lifestyle that I wouldn’t have been able to afford otherwise.
However, I am thinking of selling to move closer to my children. It would appear that I am liable for capital gains tax on the part of my property that has been earning rental income. This is two-thirds of my house, based on square metres. The valuation of my house in June 2017 with its top storey was $1.5 million.
