2 hours ago
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July 1, 2026 — 5:01am
My husband and I purchased a holiday home 14 years ago. We used it ourselves and also rented it out through a holiday letting agent until 2022. During that time, and since then, we have carried out substantial renovations. Our main residence remains in Brisbane, although we divide our time between the two properties.
A friend told me that capital gains tax (CGT) only applies when you are receiving rental income. Does that mean CGT would not apply for the period since we stopped renting it out? Also, does the fact that it was rented for only about 90 days a year affect the CGT outcome?
The information you were given is incorrect. You’ll need to work with your accountant on this one because the capital gains tax will be apportioned between the periods when the property was used privately and when it was producing rental income.
If there were times when it was available for rent but not actually rented, or periods when it was neither rented nor available for rent, that may also affect the calculation. The fact that it was rented for only about 90 days a year does not, by itself, determine the outcome. I hope you’ve been keeping good records.
My spouse and I are self-funded retirees in our mid-60s. We own our home and a modest 1970s villa unit that we bought outright five years ago for $325,000. We have since renovated it, and before the budget believed it was worth about $425,000, although it now appears many investors are selling. The unit is rented to an excellent tenant for $430 a week, who has just signed a further 12-month lease. Our income comes from our super pensions, the rent and interest on bank deposits. Since retiring six years ago, we have paid no income tax because our taxable income has remained below the tax-free threshold.
My husband is reluctant to sell because the unit could provide a useful stopgap home if we sell our house before moving into a retirement village. We have seen too many people commit to a retirement village before selling their home and end up under unnecessary financial stress. Under the proposed capital gains tax changes, if we eventually sell the unit after June 30, 2027, would we still be able to use our individual tax-free thresholds to offset the capital gain, or would the proposed 30 per cent minimum tax apply regardless of our low taxable income?
If you sign a contract before June 30, 2027, the entire capital gain will be taxed under the existing rules. If the contract is signed after that date, the gain will effectively be split into two periods.
The portion that accrued up to June 30, 2027 will retain the existing treatment, while the gain after that date will be subject to the proposed new rules, including the 30 per cent minimum tax on this portion even if it is within your tax-free threshold.
Given the relatively modest value of the property and your view that it has limited long-term growth potential, I would be inclined to bite the bullet and sell before June 30, 2027. If you later decide to move into a retirement village, you can generally sign a contract that is conditional on the sale of your home. Most retirement villages are happy to accommodate that arrangement.
I understand that SMSFs may be able to reset the cost base of their assets for the purposes of the proposed Division 296 tax. Does the ATO require any form to be lodged this financial year to make that election? Also, can individual investors holding shares outside super similarly reset their capital gains tax position without actually selling the assets?
Meg Heffron confirms that no action is required this financial year. The ATO does not need to be notified of an SMSF’s decision until the due date of the 2026/27 tax return. At this stage, the ATO has not advised whether trustees will need to complete a specific form, keep documentation on file, or simply make an election as part of the annual return process.
It is also important to understand that this relief applies only to eligible SMSFs and small APRA funds. Individual investors cannot reset the cost base of shares or other investments without selling them. Outside super, the normal capital gains tax rules continue to apply, and a cost base reset generally occurs only when an asset is disposed of and re-acquired.
One other point worth noting is that an SMSF that elects to use the relief must reset the cost base of all eligible assets, including those currently showing a capital loss. This differs from the 2017 cost base reset, when funds were able to choose which assets to reset and which to leave untouched.
My wife, aged 74, has dementia after 52 years of marriage. We have about $3 million in superannuation, all in pension phase, and own our apartment, worth about $2 million. She is likely to enter residential aged care in the coming financial year. The facility we have chosen requires a Refundable Accommodation Deposit (RAD) of $1.4 million, with ongoing care costs of about $120,000 a year until the lifetime cap is reached.
I understand that the RAD is counted as an asset for the aged care means test rather than being treated as part of our principal residence. That seems unfair. Have I misunderstood the rules?
Aged care specialist Rachel Lane confirms that your understanding is correct. The RAD is an assessable asset for calculating your wife’s aged care means-tested fees and is not treated as part of your principal place of residence.
However, because you continue to live in the family home, you are regarded as a protected person, so the home itself remains exempt from the aged care means test. It is also worth noting that once your wife enters residential aged care, you will be treated as an illness-separated couple for age pension purposes.
From July 1, the combined assets test cut-off for an illness-separated couple is $1,567,000, and both your home and your wife’s RAD are exempt from the age pension assets test. The annual cost of $120,000 appears to include all ongoing fees, including a higher everyday living fee.
Be aware that the lifetime cap, currently $138,000, applies only to the non-clinical care contribution. Other fees continue to be payable even after that cap has been reached.
Noel Whittaker is author of Retirement Made Simple and other books on personal finance. Questions to: [email protected]
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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