## When to use the form

[Foreign resident capital gains withholding](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/foreign-resident-capital-gains-withholding-overview) (FRCGW) applies to vendors disposing of certain taxable property under contracts entered into from 1 July 2016.

Australian resident vendors should use the online [Foreign resident capital gains withholding clearance certificate application](https://www.ato.gov.au/frcgw_clearance_certificate.aspx) to notify us that FRCGW doesn't need to be withheld from the sale of taxable Australian real property assets.

It provides the details of vendors so we can establish their tax residency status.

If you are a foreign resident, don't lodge an application – if you are entitled to a [variation](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/foreign-residents-and-variations) to your CGT liability, lodge a variation request.

## Apply now

Australian resident vendors should use the online [Foreign resident capital gains withholding clearance certificate application](https://www.ato.gov.au/frcgw_clearance_certificate.aspx)

Don't wait to sign a contract, lodge your application as soon as you are thinking of selling. **It can take up to 28 days to process.**

The certificate is valid for 12 months from the date issued.

Vendors must provide the purchaser with an ATO issued clearance certificate on or before the day of settlement of the sale of the asset to ensure no withholding occurs.

Each vendor must lodge their own application. Vendors who are parties to the same property transaction are not able to lodge joint applications.

## Who can complete and lodge

A clearance certificate application form should be completed and lodged by Australian resident vendors who don't wish to have an amount withheld by purchasers.

The entity that has legal title to the asset, is the entity required to obtain a clearance certificate for foreign resident capital gains withholding purposes. Where a purchaser acquires an asset through a sale or transfer, the vendors are the individuals or companies that have legal title to the asset before the sale or transfer.

Where the vendor of the asset is the trustee of a trust (for example, an executor of a deceased estate or a trustee of a superannuation fund) it is the trustee that applies for the clearance certificate. The trustee should apply for the clearance certificate using (as the identifier) their:

- own tax file number (TFN)
- Australian business number (ABN).

To avoid possible delays in issuing a clearance certificate, ensure:

- the [associates’ detailsExternal Link](https://abr.gov.au/business-super-funds-charities/applying-abn/what-you-need-your-abn-application/associates-details) in the [Australian business registerExternal Link](https://www.abr.gov.au/business-super-funds-charities/updating-or-cancelling-your-abn/update-your-abn-details) are updated with the current corporate trustee details.
- where a corporate trustee doesn't have a TFN, you must attach the details of the relevant trust and the company's Australian company number (ACN) to the application.

Where a purchaser acquires an asset that has been granted (such as a lease), the vendors are the grantors of the asset.

Vendors may either complete and lodge the form themselves, or have it completed and lodged on their behalf by a third party (for example, a solicitor, an accountant, or a tax agent).

Conveyancers, real estate agents and other persons charging a fee for services can't complete the form on behalf of the vendor unless they are a legal practitioner or registered tax agent.

However, a vendor may provide a completed paper PDF version of the form to a conveyancer, real estate agent or other person charging a fee for service, who should enter the details in the online form (providing faster processing) as part of the settlement process they provide the vendor.

## How to complete the online form

You can't save an incomplete clearance certificate application form and return to complete it at a later date – the form must be completed and submitted in one session.

These instructions explain how to complete each section of the form, lodging your application and what happens next.

The foreign resident capital gains withholding clearance certificate application will request specific information based on the information you provide. Mandatory fields are marked with an asterisk (*).

Help is available in the top right-hand side of the form. If you are unsure of how to complete this form after reading these instructions, you can phone us on **13 28 66** (Fast Key Code **4, 2**).

**Form sections:**

- [1. Application type](https://www.ato.gov.au/forms-and-instructions/capital-gains-withholding-clearance-certificate-for-australian-residents-online-application#BK_1Applicationtype)
- [2. Who can the ATO contact about this form](https://www.ato.gov.au/forms-and-instructions/capital-gains-withholding-clearance-certificate-for-australian-residents-online-application#BK_2WhocantheATOcontactaboutthisform)
- [3. Vendor details](https://www.ato.gov.au/forms-and-instructions/capital-gains-withholding-clearance-certificate-for-australian-residents-online-application#BK_3Vendordetails)
- [4. Application details](https://www.ato.gov.au/forms-and-instructions/capital-gains-withholding-clearance-certificate-for-australian-residents-online-application#BK_4ApplicationDetails)
- [5. Attachments](https://www.ato.gov.au/forms-and-instructions/capital-gains-withholding-clearance-certificate-for-australian-residents-online-application#BK_5Attachments)
- [6. Declaration](https://www.ato.gov.au/forms-and-instructions/capital-gains-withholding-clearance-certificate-for-australian-residents-online-application#BK_6Declaration)
- [7. Confirmation screen](https://www.ato.gov.au/forms-and-instructions/capital-gains-withholding-clearance-certificate-for-australian-residents-online-application#BK_7ConfirmationScreen)

### 1. Application type

This question determines if you are submitting the application as a vendor of the asset or their representative (for example, lawyer or accountant):

- *Are you submitting this application as a vendor of the asset or their representative? – select vendor or vendor's representative.
- Conveyancers who are simply keying the form on behalf of a vendor should select 'vendor'.
- Contract date (or possible contract date) – enter the contract date as shown on the contract of sale. If no contract is yet signed, you can enter an anticipated date.
- Expected settlement date of the asset – enter the date of settlement for the sale, or when you expect it to settle.

At the end of the application type section click **Next** to proceed to the:

- vendor details section of the form – if the applicant is the vendor
- contact details page – if the applicant is the vendor's representative.

### 2. Who can the ATO contact about this form

If you're submitting the application as the vendor's representative, you must provide your contact details. This allows us to contact you to resolve any issues and process the form in a timely manner.

We'll provide the contact person with a copy of the Clearance Certificate Application decision at the same time as we provide it to the vendor.

If you're a conveyancer who is not a legal practitioner or tax agent, you can be the contact for the purposes of the form.

However, if questions are asked, we would expect that you relay these to the vendor. The vendor can then provide you with answers which you can communicate to us. Alternatively, you may ask us to contact the vendor directly should further questions be raised.

The contact detail fields are:

- Title – select the title of the contact person from the list provided
- First name – the first name of the contact person
- *Last name – the last name of the contact person
- Job title – the job title of the applicant, which may also be used to disclose the relationship between the applicant and the vendor
- Contact email address – the email address for the contact person. By providing an email address, you are authorising us to respond to you by email. If you don't provide us with an email address, it may take longer to receive the clearance certificate as we will mail it to you.
- If you choose to communicate with us via email, be aware the internet isn't a secure environment. We can't guarantee the privacy and security of personal information.
- Contact phone number – the contact person's phone number (including area code) and country code (if the country is not Australia). Don't include brackets ( ) or spaces in your entry. Providing a phone number will ensure we can easily contact you if we require additional information to process the clearance certificate.
- *Address – the contact's address, including the suburb/town/locality, state/territory, postcode and country.

**Note:** Providing a contact email address and phone number will help to avoid unnecessary delays. We will contact you if we need to clarify any details during the application process.

If you choose to communicate with us via email, be aware the internet isn't a secure environment. We can't guarantee the privacy and security of personal information.

The following options are presented at the end of the contact details section:

- **Back** – to return to the last screen that had been viewed
- **Print friendly version** – to print the details that have been entered into the form
- **Next** – to proceed to the vendor details section of the form.

### 3. Vendor details

The vendor should be the entity that has legal title to the asset. If there are multiple vendors on the title, each vendor will need to apply for a separate clearance certificate in their name.

**Note:** Where the vendor is the trustee of a trust, that entity should apply for the clearance certificate using their:

- tax file number (TFN)
- Australian business number (ABN), if they have one
- Australian company number (ACN), if they have one.

Providing as much detail as possible reduces the likelihood of us having to contact the nominated contact person in section 2 (if completed).

The vendor details fields are:

- Tax file number (TFN) – enter the vendor's TFN. While you're not required to provide the vendor's TFN, providing the TFN assists us in identifying the vendor in our records which means that we can process the application faster
- Australian business number (ABN) – enter the vendor's ABN. While you're not required to provide the vendor's ABN, providing your ABN assists us in identifying the vendor in our records which means that we can process the application faster
- *Entity type – select the entity type of the vendor from the list. The entity that has legal title to the asset, is the entity required to obtain a clearance certificate for foreign resident capital gains withholding purposes.

For transactions involving assets held on trust (including the assets of deceased estates and superannuation funds), select the entity type that corresponds with the entity that is the trustee (either 'individual' or 'trustee'). Applicants should **not** use the 'other' entity type as this will result in a delay in processing the application.

- Only select **other** if the vendor is not an entity of one of the specified entity types
- If the entity type of the vendor is a **company**, the company detail fields will appear
- *Company name – the legal name of the company (that is, the name under which the vendor is incorporated as reflected on the certificate of title)
- Business name (if applicable) – the business name or trading name of the vendor
- Ultimate holding company – the name of the ultimate holding company of the vendor. This is the company that has ownership and controlling interest over the whole group of companies of which the vendor is a member
- If the entity type of the vendor is an **individual,** the individual detail fields will appear
- Title – select the title of vendor from the list provided
- First name – the first name of the vendor
- Other given names – if an individual has another given name reflected on the certificate of title, they should include this. Including only the initial is also acceptable
- *Last name – the last name of the vendor.

If the vendor's name has changed, you need to [update your name](https://www.ato.gov.au/individuals-and-families/tax-file-number/update-your-tfn-registration-details/update-your-name) on our systems before you apply for a clearance certificate. The clearance certificate issues in the legal name that we have on our systems.

- *Date of birth – the date of birth of the vendor in dd/mm/yyyy format or select from the calendar icon
- Contact email address – the vendor's email address. By providing an email address you are authorising us to respond to you by email. If you don't provide an email address, it may take longer to receive the clearance certificate as we will mail it to you.
- If you choose to communicate with us via email, be aware the internet isn't a secure environment. We can't guarantee the privacy and security of personal information.
- Contact phone number – the vendor's phone number, including area code and country code (if the country is not Australia). Don't include brackets ( ) or spaces in your entry. Providing a phone number will ensure we can easily contact you if we require additional information to process your clearance certificate.

**Note**: You must provide either a contact phone number or email address. Providing both will help to avoid unnecessary delays. We will contact you if we need to clarify any details during the application process.

- If the entity type of the vendor is **other** entity, the other entity detail fields will appear
- *Entity name – the legal name of the vendor as reflected on the certificate of title
- Business name (if applicable) – the business name or trading name of the vendor
- Vendors contact details – these fields appear when the entity type selected for the vendor is either **company** or **other**
- Title – select the title of contact person from the list provided
- First name – the first name of the contact person
- *Last name – the last name of the contact person
- Job title – the job title of the contact person
- Contact email address – the email address of the contact person. By providing an email address, you are authorising us to provide information to the vendor by email. If you don't provide an email address, it may take longer to receive the clearance certificate as we will mail it to the vendor.
- Contact phone number – the contact person's phone number, including area code and country code (if the country is not Australia). Don't include brackets ( ) or spaces in your entry. Providing a phone number for the vendor will ensure we can easily contact them if we require additional information to process the clearance certificate.

**Note:** You must provide either a contact phone number or email address for the vendor. Providing both will help to avoid unnecessary delays. We will contact the vendor if we need to clarify any details during the application process.

If you choose to communicate with us via email, be aware the internet isn't a secure environment. We can't guarantee the privacy and security of personal information.

- *Address – enter the vendor's address, including the suburb/town/locality, state/territory, postcode and country
- *Has your residency status changed since your last tax return or will it change before you sell the property? – select one of the following
- 'Yes' – if the vendor's residency status has changed since lodging their last tax return or will change before the property is sold
- 'No' – if the vendor's residency status hasn’t changed since lodging their last tax return or won't change before the property is sold.
- * Have you lodged a tax return for the last 2 years? – select one of the following
- 'Yes' – if the vendor has lodged both tax returns for the last 2 years for which the due date has passed
- 'No' – if the vendor has not lodged both their Australian tax returns for the last 2 years, and the due date for lodging returns for those years of income has passed.
- * Are you holding the property on behalf of a foreign resident or on behalf of other entities that include a foreign resident? – select one of the following
- 'Yes' – if the vendor holds the property on behalf of a foreign resident, or on behalf of other entities that include a foreign resident
- 'No' – if the vendor doesn’t hold the property on behalf of a foreign resident, or on behalf of other entities that include a foreign resident.

**Note:** You must answer 'Yes' to this question if you intend to use the same clearance certificate for multiple properties, any of which you hold on behalf of a foreign resident or on behalf of other entities that include a foreign resident.

The following options are presented at the end of the vendor details section:

- **Back** – to return to the last screen that had been viewed
- **Print friendly version** – to print the details that have been entered into the form
- **Next** – to proceed to the application details section of the form.

### 4. Application details

The application details provide more information about the vendor's application. This section is reached if the vendor answered:

- 'Yes' to 'Has your residency status changed since your last tax return or will it change before you sell the property?'
- 'No' to 'Have you lodged a tax return for the last 2 years?'

The application details fields are:

- If the entity type of the vendor is a **company**, the company detail fields will appear. This section requires a 'Yes' or 'No' answer to establish residency status of the company
- *Is the company incorporated in Australia? If you answered 'No', the following questions will need to be answered
- *Does the company carry on business in Australia?
- *Is the company's central management and control in Australia?
- *Is the company's voting power controlled by shareholders who are residents in Australia?
- If the entity type of the vendor is an **individual**, the individual detail fields will appear
- *Are you migrating and settling in Australia? Select 'Yes' or 'No'.

**Note:** Answer 'Yes' if you have lived in Australia for the past 3 years, but you have not been required to lodge an income tax return in the last 2 years, for example, an aged pensioner.

Immigrants must hold a current permanent residence visa, issued by the Department of Immigration and Border Protection, and intend to reside permanently in Australia. New Zealanders do not need a permanent residency visa, however they must intend to reside permanently in Australia.

- *Are you an Australian returning to live in Australia? – select 'Yes' or 'No'
- *Have you stayed, or do you intend to stay, in Australia for 6 months or more? – select 'Yes' or 'No'
- *Do you have social or economic ties to a country other than Australia? – select 'Yes' or 'No'
- *What is your main purpose for being in Australia? – select your main reasons for being in Australia
- *Have you stayed or intend to stay in a particular place continuously for 6 months or more? – select 'Yes' or 'No'
- *Where do you live while in Australia? – select where you live while in Australia
- *Do you have a spouse and/or dependent children? – select 'Yes' or 'No'
- *Where are your spouse and/or dependent children? – select where your spouse/dependent is living
- *Where do you hold the majority of your assets? – select Australia or overseas
- *Are you a member of any clubs, churches, community groups or organisations in Australia? – select 'Yes' or 'No'
- *Have you been in Australia, either continuously or intermittently, for 183 days or more in the income year? – select 'Yes' or 'No'
- *Is your usual place of abode outside of Australia? – select 'Yes' or 'No'
- *Do you intend to take up residence in Australia? – select 'Yes' or 'No'

The following options are presented at the end of the application details section:

- **Back** – to return to the last screen that had been viewed
- **Print friendly version** – to print the details that have been entered into the form
- **Next** – to proceed to the attachments section of the form.

### 5. Attachments

You can electronically attach any documents you believe support the application for a clearance certificate.

This may be relevant where:

- your residency status changed since your last tax return or will change before you sell the property
- you have not lodged a tax return for the last 2 years.

You can attach more than one file and each file must be in .doc, .docx, .rtf, .xls, .xlsx, .pdf, .jpg, .tif, .bmp, .png, or .gif format.

The following options are presented at the end of the attachments section:

- **Back** – to return to the last screen that had been viewed
- **Print friendly version** – to print the details that have been entered into the form
- **Next** – to proceed to declaration section of the form.

### 6. Declaration

*Complete the declaration section of the form.

There are 2 parts of this section to complete:

- *the declaration
- *declare you are not a robot – this field is required for system operational reasons.

Once you have completed this section, you should submit the form.

The following options are presented at the end of the declaration section:

- **Back** – to return to the last screen that had been viewed
- **Print friendly version** – to print the details that have been entered into the form
- **Submit** – to submit the form.

### 7. Confirmation screen

The confirmation screen confirms the clearance certificate application form has been successfully lodged.

You should retain a copy of the form. Do this by selecting Print friendly version to save or print the application.

## What happens next

We will process your application and notify you of the outcome. If you don’t provide an email address, we will mail the clearance certificate to your contact postal address. If required, we will contact you to resolve or clarify any information.

Individual vendors can obtain a copy of their clearance certificate outcome online:

- Login in to **myGov** and go to **ATO online services**
- **My profile** menu, go to **Communication**
- then **History**.

If we approve a clearance certificate, you'll need to provide a copy to the purchaser on or before settlement.


### How do I notify the ATO when someone dies?

We understand that tax won’t be your priority when someone passes away. But it’s a good idea to let us know that a person has died so we can stop sending correspondence to them.

When you’re ready, you’ll need to [officially notify us of their death this opens in a new window ](https://www.ato.gov.au/individuals-and-families/deceased-estates/notifying-us-of-a-death-and-who-will-manage-the-estate#ato-Whocannotifyus) and provide supporting documents like a death certificate, probate or letters of administration. This tells us who is authorised to manage the estate.

You can notify us by:

### Can I access a deceased person’s tax and super info?

You can access a person’s full tax and super records if you are authorised to manage their estate. This is called an authorised [legal personal representative this opens in a new window ](https://www.ato.gov.au/individuals-and-families/deceased-estates/who-can-represent-a-deceased-estate#ato-WhocanbealegalpersonalrepresentativeLPR) (LPR).

An authorised LPR is generally an executor who has obtained [grant of probate this opens in a new window ](https://www.ato.gov.au/individuals-and-families/deceased-estates/who-can-represent-a-deceased-estate#Whatareprobateandlettersofadministration) or another person with [letters of administration this opens in a new window ](https://www.ato.gov.au/individuals-and-families/deceased-estates/who-can-represent-a-deceased-estate#Whatareprobateandlettersofadministration).

If you’re the authorised LPR, you may decide to appoint a solicitor or tax agent to help you manage the estate. If you do, we can share the deceased person’s info with them too.

If you are not the authorised LPR, we can still help you but there are some legal restrictions on the info we can share.

For more info on [accessing a deceased person’s tax and super info this opens in a new window ](https://www.ato.gov.au/individuals-and-families/deceased-estates/accessing-a-deceased-person-s-tax-and-super-information) check out our website.

### Do I need to lodge a final tax return?

If the deceased person earned income in the year they died, you may need to lodge a final tax return. This is known as a ‘date of death’ tax return, and is different to the [trust tax return for the deceased estate this opens in a new window ](https://www.ato.gov.au/individuals-and-families/deceased-estates/doing-trust-tax-returns-for-the-deceased-estate). The return essentially finalises their personal tax obligations up until their date of death.

Generally, the authorised LPR should lodge the return. If you aren’t the authorised LPR, you can still lodge – we’ll just review the return to determine what actions we need to take.

You can lodge a final tax return using the [paper tax return for individuals this opens in a new window ](https://www.ato.gov.au/TaxReturnForIndividuals-redirect). If you’ve appointed a tax agent to help you, they can prepare and lodge the return online.

For more help [lodging a final tax return this opens in a new window ](https://www.ato.gov.au/individuals-and-families/deceased-estates/doing-a-final-tax-return-for-the-deceased-person) visit our website.

### What if no income was earned in the year of death?

If a date of death tax return is not required, you can let us know by completing a [non-lodgment advice form this opens in a new window ](https://www.ato.gov.au/Non-LodgmentAdvice-redirect). Where the form asks for a reason, print ‘DECEASED’ followed by the date of death.

### What happens to HECS-HELP loans upon death?

If a deceased person has a study loan, the amount they owe is worked out up until the day they passed.

When their final tax return is processed, we’ll work out if a final [compulsory repayment this opens in a new window ](https://www.ato.gov.au/individuals-and-families/study-and-training-support-loans/compulsory-repayments) is required.  Any outstanding loan amount that remains after this will be cancelled.

You can read more about loan repayments on the [Study Assist website this opens in a new window ](https://www.studyassist.gov.au/managing-and-repaying-your-loan/loan-repayments).

### What happens to other government agency debts upon death?

If there are outstanding debts with us or other government agencies, they’ll need to be handled by the deceased estate.

If the estate has enough assets to cover the debts, the executor must pay the amounts owing. After that, the remaining assets can be distributed to beneficiaries according to the will.

### Do I need to submit a trust tax return?

Finalising a deceased estate can take anywhere between **6 to 12 months** – sometimes longer. A trust tax return covers the period **after** their death and tells us about any income generated by the estate. For example – interest, dividends or rental income.

If you’re required to lodge a trust tax return, you’ll need to do so each year until the estate has been fully distributed to the beneficiaries.

Work out if a [trust tax return this opens in a new window ](https://www.ato.gov.au/individuals-and-families/deceased-estates/doing-trust-tax-returns-for-the-deceased-estate/when-and-how-to-lodge-returns-for-a-deceased-estate) is required and how to prepare a deceased estate return.

### Can probate expenses be claimed as a tax deduction?

Whether you can claim probate expenses depends on the type of deceased estate tax return you’re completing.

If it’s the final tax return for a deceased individual (also known as a date of death tax return), you can include:

You can include tax agent’s fees and similar expenses you incur as the executor.

### How do I complete my own tax return if my spouse dies?

If your spouse passes away during the income year, there are some steps you’ll need to follow when completing your own tax return. They include:

### Do I have to pay tax as a beneficiary of a deceased estate?

If you receive an inheritance as a beneficiary of a deceased estate, you won’t need to pay tax on the inheritance itself. However, you may have tax obligations for the assets you inherit. These can include:

You don’t need to declare inherited money or assets, like jewellery, on your tax return. Our article has more information on [tax on gifts and inheritances](https://community.ato.gov.au/s/article/a079s0000009GnFAAU/tax-on-gifts-and-inheritances).


## Overview of deregistration

A company may be deregistered:

- voluntarily, for example after it is closed down
- by the Australian Securities & Investments Commission (ASIC), for example for outstanding annual review fees
- by court order, for example following amalgamation or because of winding-up.

Once a company is deregistered, it ceases to exist as a legal entity and can no longer do anything in its own right.

To prevent administrative deregistration of your company by ASIC, keep your contact details and obligations up to date with ASIC.

## Before voluntary deregistration

Before you voluntarily deregister your company, you must make sure all the company's tax and superannuation obligations are up to date.

This includes:

- lodging and confirming we have processed all overdue and final tax forms including

- tax returns
- activity statements
- fringe benefits tax returns
- taxable payments annual reports
- paying all outstanding debts
- finalising your company’s super affairs, including paying super guarantee amounts and charges
- finalising your end of year reporting, for example if you report through Single Touch Payroll (STP)
- ensuring a replacement trustee is appointed if you are acting as the corporate trustee of a super fund or trust
- finalising lodgments and other obligations if the company is

- part of a goods and services tax (GST) group
- an income tax group, or
- a partner in a partnership.

Early tax returns can be lodged electronically using Standard Business Reporting (SBR)-enabled software.

## After deregistration

Once deregistered, a company ceases to exist. This means we will stop:

- paying refunds
- interacting with the company, including through former directors and other representatives
- processing forms lodged after deregistration
- enabling reporting, for example through STP.

We will also:

- cancel any tax forms received after deregistration
- cancel the company's Australian business number (ABN) and all registrations, for example pay as you go (PAYG) withholding and GST
- cancel any links the company has to registered intermediaries
- refund credits the company was entitled to before deregistration, including to

- the company only, where its registration has been reinstated by ASIC
- the liquidator, where a GST credit arose after they were appointed
- ASIC in all other cases.

### Director penalties

Company directors may still be liable for some debts incurred before deregistration. For example, if a company does not meet its obligations, we may recover the following amounts under the [director penalty](https://www.ato.gov.au/individuals-and-families/paying-the-ato/if-you-don-t-pay/director-penalty-regime) regime:

- PAYG withholding
- net GST (including luxury car tax and wine equalisation tax)
- super guarantee charge (SGC).

#### Requesting confidential information to meet your obligations

We can disclose confidential information to a former director to help them understand or comply with their tax obligations, including where they require further information in relation to a director penalty.

We won’t disclose confidential information if you request it for purposes other than to support you to meet your tax obligations – for example, to support your position in a private dispute.

##### Example: when disclosure is permitted

Tom is a former director of ABC Pty Ltd, that was deregistered in 2023. Tom no longer has access to ABC Pty Ltd’s company records. In 2024, we issue a director penalty notice to Tom in relation to $4,000 in unpaid super guarantee charge (SGC) incurred by ABC Pty Ltd prior to deregistration.

Tom contacts us and requests information regarding the calculation of the underlying SGC liability, and the names of the employees to which the shortfalls relate. Tom states he is seeking the information so he can satisfy himself of the amount of the liability, and confirm whether he has already made payments towards the outstanding liability.

The ATO officer considers Tom’s request and determines the information would enable him to understand or comply with his tax obligations. They disclose the information to Tom.

End of example
## Reinstatement of registration

If your company has been [deregistered by ASICExternal Link](https://asic.gov.au/for-business/closing-your-company), you can seek advice from them regarding whether:

- your entity's circumstances meet their criteria for administrative reinstatement
- you have to apply to the court for an order that they reinstate your company.

Once the company is reinstated by ASIC, we will treat it as if it had never been deregistered. You can make lodgments which we will process.

Lodgments made to us during the period of deregistration must be re-lodged by the company after reinstatement, unless there is a court order validating those lodgments.

We may apply to reinstate a deregistered company for the purpose of pursuing outstanding liabilities owed by the company before deregistration.


**Ruling**

**Subject: Rental deductions for tree and asbestos contamination removal**

**Question 1**

Are you entitled to a deduction under section 40-755 of the *Income Tax Assessment Act 1997* (ITAA 1997) for expenditure incurred in the removal of asbestos affected areas, including the removal of a garage and carport, from your rental property?

**Answer**

Yes

**Question 2**

Are you entitled to a deduction under section 8-1 of the ITAA 1997 for expenditure incurred on tree removal?

**Answer**

No

**Question 3**

Are you entitled to a deduction under section 8-1 of the ITAA 1997 for expenditure incurred for landscaping?

**Answer**

No

**This ruling applies for the following period:**

Year ended 30 June 20xx

**The scheme commences on:**

1 July 201xx

**Relevant facts and circumstances**

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are the joint owner of a rental property.

Safety concerns arose when the tenant discovered exposed pieces of a material in the garden and requested you have them removed. A contractor was engaged to clean up the garden.

Following the contractors work severe rain exposed further pieces in the rear of the yard.

The tenant was also concerned about a garage constructed from asbestos and requested you undertake an asbestos review.

You engaged an environmental company to inspect the area and provide recommendations.

The company reported the exposed pieces were asbestos that appeared to have been buried and had contaminated the soil. The company provided reports which recommended the garage and contaminated soil be removed.

You engaged a qualified asbestos removal company to remove the contaminated areas. Both the garage and a carport were demolished and have not been replaced. On completion of the asbestos removal works you obtained a clearance certificate.

Further safety concerns arose regarding two trees on the property and council allowed for their removal.

An application was submitted to the council requesting to have them removed. A Tree Officer from the council attended the premises and determined:

The trees were removed a professional tree lopping company.

As a result of the soil removal, the area was landscaped and re-grassed.

**Relevant legislative provisions**

*Income Tax Assessment Act 1997* section 8-1

*Income Tax Assessment Act 1997* section 25-10

*Income Tax Assessment Act 1997* section 40-775

**Reasons for decision**

**Summary**

You are entitled to a deduction for your share of the costs to remediate the asbestos affected areas of the property.

You are not entitled to deduction for your share of the costs for landscaping or removal of the trees, including the stumps and roots. These expenses are capital in nature**.**

**Detailed Reasoning**

**Asbestos Removal**

Section 40-755 of the ITAA 1997 provides a deduction for expenditure you incur for the sole or dominant purpose of carrying on environmental protection activities. Paragraph 40-755(3)(a) of the ITAA 1997 further clarifies an earning activity ‘is an activity you carried on, carry on, or propose to carry on for the purpose of producing assessable income for an income year (except a net capital gain)’.

Environmental protection activities are listed in subsection 40-755(2) of the ITAA 1997. One class of environment protection activities is:

The environmental protection provisions are provisions of last resort. If a deduction is allowable under another provision of the ITAA 1997, the expenditure is not deductible under section 40-755 of the ITAA 1997.

In your case you have incurred expenses to have the asbestos removed from the property. You also incurred associated expenses to obtain approval for the removal of the asbestos.

These expenses are considered to be capital in nature as it is a one-off cost that results in a lasting advantage, that is, the removal of the pollution risk to the property. Therefore, a deduction is not allowed under sections 8-1 of the ITAA 1997 or 25-10 of the ITAA 1997.

It is, however, considered that your sole or dominant purpose in carrying out the work was to rid the affected areas of pollution on the site of your income earning activity by asbestos and prevent further contamination or deterioration.

Therefore, you are entitled to a deduction for the total cost of removing asbestos from your rental property under section 40-755 of the ITAA 1997.

**Tree Removal**

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.

Subsection 25-10(1) of the ITAA 1997 allows a deduction for expenditure incurred for repairs to premises (or part of premises), that you held or used solely for the purpose of producing assessable income. Capital expenditure, however, is not deductible under subsection 25-10(3) of the ITAA 1997.

The removal of a tree, including its stumps and roots, is not a maintenance or repair expense and is similar to that which normally falls for consideration under section 25-10 of the ITAA 1997. Normally this is a one-off type expense that produces an enduring benefit, and is considered to be an improvement.

In your case, you incurred expenses to remove two trees that were likely to cause damage to your rental property. The removal of trees is not considered to be a repair as there is no replacement or correction of defects in or damage to the trees. The trees were removed to eliminate any potential risk and are no longer in existence. As the removal of the trees is not actually repairing any damage, a repairs deduction is not allowable under section 25-10 of the ITAA 1997

Additionally, the expense is considered to be capital in nature as it is a one-off expense that provides an enduring benefit, that being, the removal of a potential hazard. As the expense is capital in nature, a deduction is also not allowable under section 8-1 of the ITAA 1997.

Therefore, you are not entitled to a deduction for the expenses incurred to have the trees removed from your rental property.

**Landscaping**

Typically, deductible expenditure incurred to maintain a rental property will be ongoing and recurrent and is incurred to preserve the property and keep it in a rentable state; whereas non-deductible maintenance expenditure is typically one-off and provides an enduring benefit.

Expenses incurred for repairs to a property used for income producing purposes are deductible providing the expenditure is not of a capital nature.

Taxation Ruling TR 97/23 explains the circumstances in which expenditure incurred for repairs is an allowable deduction. Generally a repair involves a restoration of a thing to a condition and efficiency it formerly had without changing its character.

Works can be fairly described as repairs if they are done to make good damage or deterioration of property that has occurred by ordinary wear and tear, by accidental or deliberate damage, or by the operation of natural causes during the passage of time. To repair property improves to some extent the condition it was in immediately before repair; however, a minor or incidental degree of improvement may be done to property and still be a repair.

Where the work amounts to a substantial improvement and results in a greater efficiency of function in the property, the expenditure is not for repairs and is of a capital nature. An improvement involves bringing a thing or structure into a more valuable or desirable form, state or condition than a mere repair would do. Some factors that point to work done to property being an improvement include whether the work will extend the property’s income producing ability, significantly enhance its saleability or market value or extend the property’s expected life.

General garden maintenance is an allowable deduction where, for example, you pay someone to mow lawns, maintain garden beds or prune trees. However, landscaping is considered to be an improvement and therefore not an allowable deduction as a repair or as a deduction under section 8-1 of the ITAA 1997.


## Importer for the purpose of claiming GST credits

You must be the importer of the goods to claim GST credits. You are the importer of the goods if both of the following apply:

- you have caused the goods to be brought to Australia for your own purposes
- you, or your agent, are named as the 'owner' of the goods on the import declaration.

You have caused goods to be brought to Australia if the goods were brought to Australia for application to your own purposes after importation.

You use goods for your own purposes if you sell, lease or hire the goods, use the goods as trading stock or use the goods in the manner consistent with their design or nature.


## Changes in creditable purpose

The amount of GST credit you can claim on a purchase or importation depends on the extent to which it is used for a creditable purpose. You may have to make an adjustment if there is a change in the extent of the creditable purpose.

You use goods or services for a 'creditable purpose' if you use them in your business. This does not include their use:

- to make input-taxed sales, or
- for private or domestic use.

The 'creditable purpose' of a purchase changes if either:

- there is a difference between how you planned to use it and how you actually use it
- the way you use it has changed over time.

Adjustments are required for changes in creditable purpose because the GST credit you originally claimed will either have been too much or too little.

You will generally not have to make an adjustment for a change in creditable purpose:

- if the value of the purchase or importation was $1,000 (GST-exclusive) or less
- if the value of the purchase or importation related to business finance and was $10,000 (GST-exclusive) or less.

### Adjustment periods

'Adjustment periods' are the reporting periods in which you have to account for any adjustments in your activity statement.

An adjustment period for a purchase or importation is a reporting period that both:

- starts at least 12 months after the end of the reporting period you claimed your GST credit in (or would have claimed your GST credit in had the purchase or importation been creditable)
- ends on 30 June (or if none of your reporting periods end on 30 June, your reporting period that ends closest to 30 June).

The maximum number of adjustment periods in which you make adjustments depends on the value of the purchase or importation.

Table 1: Adjustment periods for most purchases and importations

Value of the purchase or importation (GST-exclusive)

Number of adjustment periods

$1,001 to $5,000

2

$5,001 to $499,999

5

$500,000 or more

10

Table 2: Adjustment periods for purchases or importations that relate to business finance

Value of the purchase or importation (GST-exclusive)

Number of adjustment periods

$10,001 to $50,000

1

$50,001 to $499,999

5

$500,000 or more

10

If you cancel your GST registration, your final reporting period is also an adjustment period for purchases and importations.

**See also**

- [If your business changes or ceases](https://www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxes/gst/if-your-business-changes-or-ceases)

### Working out adjustments for changes in creditable purpose

To work out the adjustment amount, follow the steps below.

**Step 1**: Work out the extent to which you have used the purchase or importation for a creditable purpose during the period, starting from when you made your purchase or importation and ending at the end of the adjustment period. Work this out as a percentage.

**Step 2**: Work out one of the following, as applicable, as a percentage.

- If you have **not** previously made an adjustment for a change in creditable purpose, work out the extent to which you had originally planned to use the purchase or importation for a creditable purpose.
- If you have previously made an adjustment for a creditable purpose, work out the extent to which you used the purchase or importation for a creditable purpose in respect of the last adjustment.

**Step 3**: Compare the percentages worked out at Step 1 and Step 2.

You have:

- **an increasing adjustment** if the percentage worked out at Step 2 is more than the percentage worked out at Step 1 – this means you pay more GST for the reporting period
- **a decreasing adjustment** if the percentage worked out at Step 1 is more than the percentage worked out at Step 2 – this means you pay less GST for the reporting period
- **no adjustment** if there is no difference between the percentages worked out at Step 1 and Step 2 – this means you do not have to make an adjustment in the reporting period.

**Step 4**: Calculate increasing or decreasing adjustments by multiplying the full amount of GST credit by the change in use (the difference between the percentages at Step 1 and Step 2). The 'full amount of GST credit' means the amount of GST credit you would have been entitled to claim if you had used the purchase or importation entirely for a creditable purpose.

To work out your adjustment:

- If you have an increasing adjustment, the adjustment is worked out as follows

- the full amount of GST credit × [percentage worked out at Step 2 less the percentage worked out at Step 1].
- If you have a decreasing adjustment, the adjustment is worked out as follows

- the full amount of GST credit × [percentage worked out at Step 1 less the percentage worked out at Step 2].

**Example: Calculating an adjustment for a change in creditable purpose**

Hollis is registered for GST and owns a bookshop. On 12 March 2015 he purchases a computer to use in his business for $1,500 (including $136.36 GST). The price of the purchase means it is subject to two adjustment periods (see [Table 1](https://www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxes/gst/in-detail/managing-gst-in-your-business/reporting-paying-and-activity-statements/making-adjustments-on-your-activity-statements/types-of-adjustments#Table1A)).

Hollis reports and pays GST quarterly and claims a full GST credit for the computer in the reporting period 1 January 2015 to 31 March 2015 because he plans to use it 100% for his business.

Hollis's first adjustment period is the reporting period 1 April 2016 to 30 June 2016. To work out if he needs to make an adjustment in that reporting period, Hollis compares his actual use with his planned use. So he compares:

- the extent to which he uses the computer for business from 12 March 2015 to 30 June 2016 (expressed as a percentage), with
- the extent to which he plans to use the computer for business (expressed as a percentage).

Hollis works out that he actually uses the computer 80% for business and 20% for personal use from 12 March 2015 to 30 June 2016.

Hollis makes an increasing adjustment on his April to June 2016 quarterly activity statement to repay some of the GST credits he claims because he:

- plans to use the computer 100% for business
- claims a full GST credit for the GST included in the purchase price of the computer
- only uses the computer 80% for business.

The increasing adjustment is calculated as follows:

- $136.36 (the GST included in the purchase price of the computer) × 20% (the difference between 100% and 80%).

Hollis' second adjustment period is the 1 April 2017 to 30 June 2017 reporting period. To work out if he needs to make an adjustment in that reporting period, Hollis compares his actual use against his previously stated use. He compares:

- the extent to which he uses the computer for business from 12 March 2015 to 30 June 2017 (expressed as a percentage), with
- the extent to which he says he uses the computer for business from 12 March 2015 to 30 June 2016 (that is, the percentage worked out in respect of the last adjustment).

Hollis works out that he used the computer 50% for business and 50% for personal use from 12 March 2015 to 30 June 2017. This is less than the extent to which he used it for business in respect of the first adjustment (80%).

Hollis makes an increasing adjustment on his April to June 2017 quarter activity statement to repay some of the GST credits he claimed. This adjustment is calculated as follows:

- $136.36 (the GST component of the purchase price) × 30% (the difference between 80% and 50%).


## Meaning of 'loan' under Division 7A

Division 7A extends the meaning of 'loan' to include:

- an advance of money
- a provision of credit, or any other form of financial accommodation
- a payment for a shareholder or their associate, if they have an obligation to repay the amount whether it's

- on their account
- on their behalf
- at their request
- a transaction (whatever its terms or form) that is the same as a loan of money.

A loan is considered to be made at the time the amount is paid either as an ordinary loan, or if any of the above is done in relation to a shareholder or an associate.

### Example: loan to a shareholder

Terry Pty Ltd loans $20,000 to Ann, a shareholder of Terry Pty Ltd. The money is loaned to Ann on the basis that she pays it back when she can. The $20,000 is a loan from Terry Pty Ltd to Ann because it is an advance of money, and Division 7A may apply.

End of example
If a private company makes one or more loans to a shareholder or their associate in an income year, it may be taken to make an [amalgamated loan](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Amalgamatedloans).

If a loan is made by way of a promissory note, it is a provision of credit or a form of financial accommodation, and Division 7A may apply.

### Example: promissory note to a shareholder

Lucas Pty Ltd provides $10,000 to Belinda, a shareholder of Lucas Pty Ltd, by way of a promissory note and under an agreement with Lucas Pty Ltd, Belinda is obliged to repay the amount. The $10,000 is a loan from Lucas Pty Ltd to Belinda and Division 7A may apply.

End of example
If a private company beneficiary, in respect of a [trust entitlement](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-trust-entitlements) which is unpaid (unpaid present entitlement), provides financial accommodation to the trustee of a trust, it will be taken to make a loan to the trustee of the trust for Division 7A purposes.

## Loans by other entities

Loans made by other entities may also have Division 7A apply, such as:

- [Closely-held corporate limited partnerships](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Closelyheldcorporatelimitedpartnerships)
- [Trusts](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Trusts)
- [Interposed entities](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Interposedentities).

### Closely-held corporate limited partnerships

Generally, [closely-held corporate limited partnerships](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-closely-held-corporate-limited-partnerships) are treated as companies for income tax purposes.

For example, a reference to a:

- share includes a reference to an interest in a corporate limited partnership
- shareholder includes a reference to a partner in a corporate limited partnership.

Division 7A applies to a closely-held corporate limited partnership in the same way it applies to a private company.

For more information, see [Taxpayer Alert TA 2007/5](https://www.ato.gov.au/law/view/document?docid=TPA/TA20075/NAT/ATO/00001) *Arrangements designed to avoid the operation of Division 7A through the use of a Corporate Limited Partnership*.

### Trusts

Division 7A applies to certain payments, loans and debt forgiveness made by trustees to a shareholder or an associate of a shareholder of a private company, where:

- the company is presently entitled to an amount from the net income of the trust estate
- the whole of that amount has not been paid by a specified date.

However, the rules do not apply in all cases where there is an unpaid present entitlement.

### Interposed entities

Division 7A applies to certain loans made by private companies to a shareholder or their associate through [interposed entities](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-interposed-entities).

## Loans that are treated as dividends

A private company may be taken to have paid a dividend at the end of the income year, if it lends an amount during the year, and:

- the borrower is a shareholder, or an associate of a shareholder, of the company
- a reasonable person would conclude that the loan was made because the borrower was a shareholder, or an associate of a shareholder, at some time.

The total of all dividends a private company is taken to have paid under Division 7A is limited to its [distributable surplus](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-distributable-surplus) for that income year.

A loan will be deemed to be a dividend by Division 7A if it's:

- made to a shareholder or an associate of a shareholder
- not fully repaid before the private company's lodgment day for the year when the loan is made – a private company's lodgment day is the earlier of the due date for lodgment, or the actual date of lodgment of their income tax return for the income year
- not excluded specifically by other sections of Division 7A.

### Exclusions

A loan is **not** treated as a dividend if:

- it is made to another company (and that other company is not acting in the capacity of trustee)
- the payment would be included in the shareholder's or their associate's assessable income under a provision of the tax law (other than Division 7A)
- the payment would be excluded from the shareholder's or their associate's assessable income under a provision of the tax law
- it is made in the ordinary course of business and on the usual terms the private company applies to similar loans to entities at arm's length
- the loan has satisfied the minimum interest charge and maximum term requirement and is made or put under a written agreement before the private company's lodgment day
- it is a distribution made in the course of a liquidator winding-up a company
- it is made to purchase shares or rights under an employee share scheme
- it is an amalgamated loan in the year it is made and provided the required minimum yearly repayments are made in the following years
- the loans were made before 4 December 1997 and there has been no variation of terms or amounts since they were made.

## Varying the terms of a pre-1997 loan

Loans made before 4 December 1997 are generally not subject to Division 7A.

However, where a loan is varied on or after 4 December 1997 – either by extending the term of the loan or increasing the amount of the loan – the loan will be treated as if it were a new loan entered into on the day it is varied. Therefore Division 7A may apply to this new loan.

## Complying loans

A loan is considered to be a 'complying loan' when it meets certain [criteria](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Criteria). Additionally, payments made by a private company can be converted to a complying loan – see [Refinancing loans](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Refinancingloans1).

When a loan is on a complying agreement, it will be excluded from being a Division 7A dividend.

Watch the video for more details about complying loans:

**Media:** Division 7A: Complying loans

[https://tv.ato.gov.au/ato-tv/media?v=bd1bdiubxseuzwExternal Link](https://tv.ato.gov.au/#/media/bd1bdiubxseuzw) (**Duration:** 05:49)

### Criteria of a complying loan agreement

There are 3 criteria a loan needs to meet to be considered to be a 'complying loan':

- [Minimum interest rate](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Minimuminterestrate)
- [Maximum term](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Maximumterm)
- [Written agreements](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Writtenagreements).

#### Minimum interest rate

The interest rate for each year of the loan must at least equal the [Division 7A – benchmark interest rate](https://www.ato.gov.au/tax-rates-and-codes/division-7a-benchmark-interest-rate). The benchmark interest rates are updated annually.

#### Maximum term

The term of the loan must not exceed the following:

- 25 years for a loan secured by a mortgage over real property, noting

- the whole of the loan must be secured by a registered mortgage over the property
- when the loan is first made, the market value of the property (less liabilities secured over the property in priority to the loan) must be at least 110% of the amount of the loan
- 7 years for any other loan.

#### Written agreements

A written agreement must be in place before the private company's lodgment day for the income year in which the loan amount was paid to the shareholder or their associate.

There is no prescribed form for the written agreement. However, as a minimum, the agreement should:

- identify the parties
- set out the essential terms of the loan, that is the

- amount and term of the loan
- the requirement to repay
- the interest rate payable
- be signed and dated by the parties.

A written agreement can be drafted to cover loans which will be made to a shareholder or their associate for a number of income years in the future.

##### Example: loan put under written agreement before lodgment day

During the 2023 income year, Frame Pty Ltd made an unsecured loan to Penelope, a shareholder of Frame Pty Ltd. The loan won't be treated as a dividend in the 2023 income year if it is:

- put under a written agreement before the private company's lodgment day
- the term of the loan is no greater than 7 years
- the rate of interest payable in subsequent income years equals or exceeds the benchmark interest rate for those years.

End of example
### Converting payments to a complying loan

Payments made to a shareholder, or their associate, can be converted to complying loans before the private company's lodgment day to avoid a dividend being deemed.

For payments converted to loans, the private company is taken to have made a loan at the time the payment was made. For more information about payments, see [Division 7A – payments by private companies](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-payments).

#### Example: payment converted to a loan before lodgment day

In the 2021 income year, XYZ Pty Ltd pays the petrol expenses of a vehicle owned by Sally, its shareholder. Sally is under no express or implied obligation to repay the amount. Unless Sally and XYZ Pty Ltd convert the payment to a complying loan, the Division 7A provisions in respect of payments will apply.

If Sally and XYZ Pty Ltd agree to convert the payment into a loan before the private company's lodgment day, the Division 7A provisions relating to loans will apply.

End of example
## Refinancing loans

Certain loans can be refinanced without resulting in a deemed dividend.

### Loan converted to a loan secured by a mortgage

An unsecured loan that is converted to a loan secured by a registered mortgage over real property can have the loan term extended. The maximum term of the loan becomes 25 years less the period of the term already expired when the loan was unsecured.

### Secured loan converted to an unsecured loan

A secured loan can also be converted to an unsecured loan but there will be a corresponding reduction in the loan term.

#### Loans in place for 18 years or less

The maximum of the unsecured loan is 7 years if the remaining term on the secured loan at the time of conversion was 18 years or less.

#### Loans in place for more than 18 years

If the secured loan has already been in place for more than 18 years, the maximum term of the unsecured loan will be reduced so that the total term of the loan (in both its secured and unsecured form) will be no more than 25 years. That is, deduct from 7 years the difference between:

- the length of the period starting when the loan was made and ending when the loan was converted
- 18 years.

### Loan subordinated to another loan from another entity

A private company loan can also be refinanced when the loan becomes subordinated to another loan from another entity. The subordination must arise as a result of circumstances beyond the control of the entity to which the original loan was made. The private company and the other entity must have dealt with each other at arm's length in relation to the subordination.

In these circumstances, the repayment of the old loan as part of the refinancing is not disregarded for Division 7A purposes.

#### Example: refinancing a loan

Hilda Pty Ltd has made a loan secured by a mortgage over real property to an associate of a shareholder, Sachin. The term of the loan was 25 years. However, after 20 years, the terms of the loan are changed so it is no longer secured by a mortgage over real property. If the expired term of the old secured loan was less than 18 years, the maximum term of the unsecured loan would be 7 years. However, in this instance, the original secured loan had already been in place for more than 18 years. As a result, in the written agreement governing the new loan, the maximum term of the loan will be 5 years (that is, 7 years less the number of years by which the existing loan has exceeded 18).

End of example
## Amalgamated loans

An amalgamated loan is when a private company makes one or more loans to a particular shareholder or associate during an income year, and each loan:

- isn't repaid before the company's lodgment day
- would be treated as a dividend, except it's under a complying loan agreement
- has the same maximum term.

Each of the individual loans are known as 'constituent loans'. The amount of the amalgamated loan is the sum of the constituent loans that have not been repaid before the lodgment day for the year of income in which the amalgamated loan is made.

### Converting to a loan secured by a mortgage

An unsecured loan can be converted to a loan secured by a mortgage over real property with a longer maximum term. When the term of an existing loan is extended because of a mortgage, a new amalgamated loan is taken to be made in the income year prior to the income year in which the extension is made. The previous amalgamated loan is disregarded if the loan comprised of one constituent loan. If the previous amalgamated loan comprised of more than one constituent loan, the amount of the previous amalgamated loan is reduced by the amount treated as a new amalgamated loan.

### More than one amalgamated loan

A private company may have a number of amalgamated loans to a shareholder or their associate at any one time. This will occur where relevant constituent loans have been made over a number of income years. Private companies with more than one amalgamated loan will need to maintain records for each loan.

### Minimum yearly repayment

[The Division 7A calculator and decision tool](https://www.ato.gov.au/calculators-and-tools/division-7a-calculator-and-decision-tool) can be used to calculate the minimum yearly loan repayment of principal and interest required to repay the amalgamated loan over its maximum term.

However, to calculate the repayment manually, the following steps can be used:

- Step 1: multiply the amount of the loan not repaid by the end of the previous income year by the current year's benchmark interest rate.
- Step 2: divide one by one plus current year's benchmark interest rate.
- Step 3: index the step 2 amount to the power of the remaining term of the loan in years.
- Step 4: one minus the step 3 amount.
- Step 5: divide the step 1 amount by the step 4 amount.

The amount of the loan referred to in step 1 is the amount of the amalgamated loan.

These steps can also be expressed as:

Where:

- MYR = minimum yearly repayment
- P = amount of loan not repaid by the end of the previous income year
- I = current year's benchmark interest rate
- T = remaining loan term (in years).

The minimum yearly repayment needs to be worked out for each income year after the year in which the loan is made.

If the private company has more than one amalgamated loan, each amalgamated loan is considered separately. The loans can't be grouped for the purposes of calculating a minimum yearly repayment. There will be a minimum yearly repayment in respect of each amalgamated loan.

### Concepts for the minimum yearly repayment formula

A number of specific concepts apply to the minimum yearly repayment formula. They are the:

- amount of loan not repaid by the end of the previous income year
- current year's benchmark interest rate
- remaining term of the loan.

#### Amount of the loan not repaid by the end of the previous income year

Generally, you calculate the amount of a loan outstanding (or not repaid) at the end of the previous income year using the following formula:

- opening balance of the amalgamated loan, as of the beginning of the previous income year, minus
- amount of principal repaid during that income year.

However, the calculation differs depending on whether the income year after the amalgamated loan is made is the:

- [first income year](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Firstincomeyear)
- [subsequent income years](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-loans#Subsequentincomeyears).

##### First income year

For the first income year after the amalgamated loan is made:

- no interest is payable in respect of the year the loan is made
- the amount of the loan not repaid by the end of the previous income year is calculated by subtracting

- the total principal repayments made before the private company's lodgment day, from the original amount of the loan.

If no repayments are made before the lodgment day, the balance of the amalgamated loan that hasn't been repaid before the end of the previous income year is the sum of the constituent loan balances at the end of that year.

###### Example: amount of amalgamated loan not repaid by the end of the income year when the loan is made

During the 2014 income year a private company made loans of $50,000 and $25,000 to a shareholder.

The loans were made under complying written loan agreements. Both loans were unsecured loans with a term of 7 years with interest rates set at the benchmark interest rates.

On 31 August 2014 the shareholder made a repayment of $20,000 on the $50,000 loan.

The private company's lodgment day for its 2014 income tax return was 15 May 2015 and the return was lodged on that date.

The amount of the amalgamated loan not repaid by the end of the 2014 income year is $55,000.

End of example
##### Subsequent income years

The amount of the amalgamated loan not repaid by the end of the income year is calculated on the basis that interest is payable on the balance of the amalgamated loan, at a rate equal to the benchmark interest rate for the income year.

For the following income years, to calculate the amount of the loan not repaid by the end of the previous income year, it's important to know how much of the repayment made in the income year is attributable to interest and how much is applied to reduce the principal.

The [Division 7A calculator and decision tool](https://www.ato.gov.au/calculators-and-tools/division-7a-calculator-and-decision-tool) provides a breakdown of the interest and principal components of the payment. To calculate this manually, apply the relevant benchmark interest rate to the amounts outstanding. If the interest rate in the written agreement is different from the benchmark interest rate, the benchmark interest rate is used to calculate the minimum yearly repayment for Division 7A purposes.

The amount of the loan repaid during an income year is obtained by deducting the interest from the actual repayments made during the year. The opening balance of the loan for the next year is the opening balance at the beginning of the previous year less the principal repaid during that year.

Where a repayment is made before the private company's lodgment day for the year in which the amalgamated loan is made, the principal amount at 1 July of the first income year after the loan is made, is not the sum total of the constituent loans at 1 July. Rather, it is the sum of the constituent loans immediately before the lodgment day. For this purpose, payments made before lodgment day are taken to have been made in the year the amalgamated loan is made.

###### Example: amount of amalgamated not repaid by the end of the income year after the loan is made

This example uses the same facts as the example above, except on 30 May 2015 the shareholder paid the private company a further $8,000, being a $4,000 payment for each loan. No other repayments were made during the 2015 income year.

Interest is calculated annually in arrears by reference to the daily balance throughout the year as follows.

Firstly, work out the daily balance throughout the year:

The principal as at 1 July 2014 is $75,000, which is the loan balance.

The repayment of $20,000 on 31 August 2014 reduces the loan balance to $55,000.

The repayment of $8,000 on 30 May 2015 reduces the loan balance to $47,000.

To calculate the interest:

= (interest payable on $75,000 from 01/07/2014 to 30/08/2014) + (interest payable on $55,000 from 31/08/2014 to 29/05/2015) + (interest payable on $47,000 from 30/05/2015 to 30/06/2015)

= (5.95% of $75,000 × (61 ÷ 365)) + (5.95% of $55,000 × (272 ÷ 365)) + (5.95% of $47,000 × (32 ÷ 365))

= $745.79 + $2,438.68 + $245.17

= $3,430 (rounded to the nearest dollar).

The 'amount of the loan not repaid by the end of the previous income year' is $50,430 ($75,000 principal + $3,430 interest − $28,000 repayments = $50,430).

If the actual interest rate used in the written agreement exceeds the benchmark rate, the 'amount of the loan remaining at the end of the previous income year' will be a notional amount.

End of example
#### Working out the remaining term

The remaining term is the difference between:

- the number of years in the longest constituent loan
- the number of years between the end of the private company's income year in which the loan was made, and the end of the private company's income year before the income year for which the minimum yearly repayment is being worked out.

If the answer is not a whole number, it is rounded up to the next whole number.

##### Example: calculate the first minimum yearly repayment (2015)

This example uses the same facts as the examples above.

To work out the first minimum yearly repayment, the amount of the amalgamated loan not repaid by the end of the 2014 income year is $55,000 (loans made less principal repayments made before the lodgment day for the 2014 income year) and the benchmark interest rate for the income year ended 30 June 2015 is 5.95%.

The remaining term is worked out as the difference between:

- the number of years in the longest constituent loan included in the amalgamated loan (7 years)
- the number of years between the end of the private company's income year in which the loan was made (2014), and the end of the private company's income year before the 2015 income year for which the minimum yearly repayment is being worked out (that is 2014), that is 0 years.

The remaining term is 7 years (that is, 7 − 0 = 7).

The minimum yearly repayment for the income year ended 30 June 2015 is worked out as follows:

Step 1: multiply the amount of the loan not repaid by the end of the previous income year by the current year's benchmark interest rate, which is 55,000 × 0.0595 = 3272.5.

Step 2: divide one by one plus current year's benchmark interest rate, which is 1 ÷ (1+0.0595) = 0. 943841435.

Step 3: index the step 2 amount to the power of the remaining term of the loan in years, which is 0.943841435 to the power of 7 = 0.667257208

Step 4: one minus the step 3 amount, which is 1 - 0.667257208 = 0.332743.

Step 5: divide the step 1 amount by the step 4 amount, which is 3272.5 ÷0.332742732 = 9835 (when rounded to the closest dollar).

In determining if there is a minimum yearly repayment shortfall, all repayments made during the 2015 income year (including those made prior to the private company's lodgment day for the 2015 income year) are taken into account.

The total of the repayments made in the 2015 income year is $28,000 (the $20,000 payment made on 31 August 2014 and the $8,000 payment made on 30 May 2015). As $28,000 exceeds $9,835, there is no shortfall and therefore no deemed dividend arises for the 2015 income year.

End of example

##### Example: calculate the minimum yearly repayment for the subsequent income year (2016)

This example uses the same facts as example 7.

The amount of the loan remaining at the end of the previous income year (that is, the year ended 30 June 2015) is $50,430 (see conclusion to example 7).

The benchmark interest rate for the 2016 income year is 5.45%.

The remaining term is worked out as the difference between:

- the number of years in the longest constituent loan included in the amalgamated loan (7 years)
- the number of years between the end of the private company's income year in which the loan was made (2014) and the end of the private company's income year before the 2016 income year for which the minimum yearly repayment is being worked out (that is 2015), that is one year.

The remaining term is 6 years (that is, 7 − 1 = 6).

The minimum yearly repayment for the 2016 income year will be worked out as follows:

Step 1: multiply the amount of the loan not repaid by the end of the previous income year by the current year's benchmark interest rate, which is 50,430 × 0.0545 = 2748.435.

Step 2: divide one by one plus current year's benchmark interest rate, which is 1 ÷ (1+0.0545) = 0. 948316738.

Step 3: index the step 2 amount to the power of the remaining term of the loan in years, which is 948316738 to the power of 6 = 0.72731157

Step 4: one minus the step 3 amount, which is 1 - 0.72731157 = 0.27268843.

Step 5: divide the step 1 amount by the step 4 amount, which is 2748.435 ÷ 0.27268843 = $10,079 (when rounded to the closest dollar).

The shareholder would need to make repayments on the loan totalling at least $10,079 to not trigger any Division 7A dividend.

End of example
#### Loan repayments not taken into account

Some payments that a shareholder, or their associate, makes to a private company in respect of a loan before the required time will not be taken into account when working out:

- the minimum yearly repayment
- how much of the loan has been repaid.

Examples of these payments include:

- a journal entry that appears to record a payment being made on a date when no payment was actually made (for example, a back dated journal entry) will not be accepted as having been made at that time
- payments where a reasonable person would conclude that the shareholder or their associate, either

- when making the payment, intended to obtain a loan (directly or indirectly) from the private company of an amount similar to, or larger than, the payment
- before making the payment, obtained a loan from the private company (directly or indirectly) of a total amount similar to, or larger than, the repayment in order to make the payment
- a loan is obtained indirectly when it is received through an [interposed entity](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-interposed-entities) arrangement.

For more information on the amount of a loan obtained indirectly, see Taxation Determination [TD 2011/16](https://www.ato.gov.au/law/view/document?DocID=TXD/TD201116/NAT/ATO/00001&PiT=99991231235958) *Income tax: Division 7A - payments and loans through interposed entities - factors the Commissioner will take into account in determining the amount of any deemed payment or notional loan arising under section 109T of the Income Tax Assessment Act 1936*.

##### Example: amount not taken to be a repayment

Alicia obtains a loan of $10,000 from Cleary Pty Ltd. Alicia is a shareholder of Cleary Pty Ltd. Alicia has until the lodgment day to repay the loan. Two weeks before the lodgment day Alicia obtains a further $10,000 from Cleary Pty Ltd. She then repays the original $10,000 loan a week before the lodgment day.

The repayment of the original $10,000 loan won't be taken into account because Alicia has borrowed a similar amount from Cleary Pty Ltd and, in this case, a reasonable person would conclude that the loan was obtained to make the repayment of the original $10,000.

The original $10,000 loan is treated as a deemed dividend subject to the distributable surplus of the private company.

End of example

##### Example: new loan obtained following repayment

Alpha Trust requires a minimum level of working capital to operate its business. Beta Co is a private company that has significant retained earnings. Alpha Trust and Beta Co are controlled by the same individual.

On 30 March 2020, Beta Co lends $200,000 to Alpha Trust to use as working capital. The parties enter into a complying loan agreement before Beta Co’s lodgment day (being 15 May 2021). On 30 May 2021, Alpha Trust repays $33,965 to Beta Co, the minimum yearly repayment required. On 2 June 2021, Beta Co lends $100,000 to Alpha Trust.

Having regard to all the circumstances, a reasonable person would conclude that the trustee of Alpha Trust intended to borrow $100,000 (which is a larger amount than the repayment) from Beta Co when the repayment was made. Alpha Trust's repayment of $33,965 may not be taken into account for the purposes of working out how much the $200,000 loan has been repaid.

End of example

##### Example: interposed entity arrangement

Apple Trust requires a minimum level of working capital to operate its business. Banana Co is a private company that has significant retained earnings. Orange Co is a private company that has no retained earnings. Apple Trust, Banana Co and Orange Co are controlled by the same family group.

On 30 March 2020, Banana Co lends $200,000 to Apple Trust. The parties enter into a complying loan agreement before Banana Co’s lodgment day (being 15 May 2021). On 30 May 2021, Banana Co lends $100,000 to Orange Co. On 31 May 2021, Orange Co lends $100,000 to Apple Trust. On 2 June 2021, Apple Trust repays $40,000 to Banana Co.

The loan between Orange Co and Apple Trust is not a Division 7A complying loan and Orange Co has no distributable surplus.

Having regard to all the circumstances including the timing of payments and the relationship between entities, a reasonable person may conclude that Banana Co lent $100,000 to Orange Co solely or mainly as part of an arrangement involving a loan to Apple Trust. Banana Co is taken to have made a notional loan of $100,000 to Apple Trust.

Having regard to all the circumstances, a reasonable person may conclude that before the payment of $40,000 was made, the trustee of Apple Trust borrowed $100,000 (which is a larger amount to the payment) from Banana Co in order to make the payment. Apple Trust's repayment of $40,000 may not be taken into account for the purposes of working out how much the $200,000 loan has been repaid.

End of example
## Payments always taken into account

Some payments will **always** be taken into account, even if there's an intention to obtain another loan when the payment is made. These payments are made by offsetting the following amounts against the balance of the loan:

- a dividend payable to the shareholder or their associate by the private company
- work and income support related withholding payments and benefits payable by the private company to the shareholder or their associate (for example, salary or wages)
- payments covered by a voluntary agreement to withhold
- if the shareholder or their associate transferred property to the private company, an amount equal to the difference between the arm's length value of property and the amount that the company has already paid the shareholder or their associate for the transfer.

A payment by legal offset is only effective in making a repayment on the loan if:

- mutual liabilities exist at the time of the offset
- there is an agreement between the private company and the shareholder or their associate to offset the liabilities (which may be express or implied).

A book entry only records a transaction, it doesn't create one. The offset agreement is the legal basis for discharging the liabilities between the parties.

In addition, a payment by another entity to the private company on behalf of the shareholder or their associate will be taken into account (regardless of any intention to obtain another loan) if the amount of the payment is:

- payable by the other entity to the shareholder or their associate
- included in the shareholder's or their associate's assessable income in the income year in which the payment is made, or in an earlier income year.

An entity can include an individual, company, trust or partnership.

### Example: minimum yearly repayment made by offsetting a dividend

In the 2022 income year Sandy obtains a complying loan from Sunshine Pty Ltd, which she is a shareholder of. In the 2023 income year Sandy is required to make minimum yearly repayments of $5,500 on the loan.

On 20 June 2023 Sunshine Pty Ltd declares a dividend of $5,500 payable to Sandy.

On 28 June 2023 Sandy and Sunshine Pty Ltd enter into an agreement to offset their mutual legal liabilities. - Sunshine Pty Ltd's liability to pay Sandy a $5,500 dividend, against Sandy's obligation to pay Sunshine Pty Ltd $5,500.

Sandy has satisfied the minimum yearly repayment for the 2023 income year, because the agreement to offset the dividend liability against the loan was entered into and executed before the end of the income year.

End of example
### Failure to make a minimum yearly repayment

A shortfall in a minimum yearly repayment on an amalgamated loan may be deemed to be a dividend (subject to the private company's distributable surplus) if:

- a private company made an amalgamated loan to a shareholder or their associate in an earlier year of income
- the amalgamated loan is not repaid at the end of the current year
- the amount paid to the private company during the current year in respect of the loan is less than the minimum yearly repayment for the current year
- the Commissioner does not exercise their discretion not to treat the amount as a dividend.

If a shareholder or their associate makes a repayment for a constituent loan in an income year after the year in which the constituent loan was made, the repayment is taken to be a repayment in respect of the amalgamated loan.

### Commissioner's discretion

If a repayment is less than the minimum yearly repayment on an amalgamated loan, discretion may apply. The shareholder or associate must satisfy us that the minimum yearly repayment was not met because of circumstances beyond their control (and they would suffer undue hardship if the loan were treated as a dividend). If we are satisfied this is the case, then the private company will not be taken to pay a dividend.

Criteria that are considered:

- the shareholder's or their associate's ability to repay the loan at the end of the income year in which the amalgamated loan was made
- any circumstances that reduced the shareholder's or their associate's ability to repay the loan
- whether the shareholder or their associate took all reasonable steps to make the minimum yearly repayment for the current income year
- whether the shareholder or their associate made payments equal to the amount of the deficiency as soon as possible after the current income year.

We may also disregard a deemed dividend and extend the period for repayments where the shareholder or their associate was unable to make the minimum yearly repayments because of circumstances beyond their control. We will specify a later date the minimum yearly repayments must be made and, provided the amount of the shortfall is paid within the specified time, the shortfall will not be taken to be a dividend.

In addition to the above discretion, where a deemed dividend arises under Division 7A because of an honest mistake or inadvertent omission, we have discretion to either:

- disregard the deemed dividend (subject to conditions being complied with)
- allow the dividend to be franked.

For more information, see:

- [Division 7A – the Commissioner's discretion under section 109RB](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-exercise-of-commissioner-s-discretion-under-section-109rb)
- [Request to extend time to make 2019–20 minimum yearly repayments for COVID-19 affected borrowers under section 109RD](https://www.ato.gov.au/forms-and-instructions/covid-19-affected-borrowers-extension-request-for-minimum-yearly-repayments-under-s109rd-2020-21)
- [Request to extend time to make 2020–21 minimum yearly repayments for COVID-19 affected borrowers under section 109RD](https://www.ato.gov.au/forms-and-instructions/covid-19-affected-borrowers-extension-request-for-minimum-yearly-repayments-under-s109rd-2019-20).

## Amount of the dividend

Where there is no loan agreement in place, the amount treated as a dividend is the amount of the loan that has not been repaid before the company's lodgment day.

For loans made under a written complying loan agreement entered into before the private company's lodgment day, a deemed dividend may arise in subsequent years if the required minimum yearly repayment is not made.

The amount deemed as a dividend is the amount by which the payments made to the company in the current year for the loan falls short of the required minimum yearly repayment for that year.

If the loan is made in the previous year of income in the course of winding-up a company, the amount treated as a dividend is the amount of the loan that has not been repaid at the end of the current income year.

### Example: non-complying loan to shareholder with repayment

On 1 January 2021, ABC Pty Ltd made a cash advance of $10,000 to Peter, a shareholder of ABC Pty Ltd. ABC Pty Ltd lodged its income tax return for the 2021 income year on 28 February 2022. By that date, Peter had repaid an amount of $2,000 and the loan had not been put on a qualifying commercial footing.

The amount treated as a dividend on 30 June 2021 is the amount of the loan not repaid before the lodgment day (for example, $8,000) subject to ABC Pty Ltd's distributable surplus.

End of example
## Franking the dividend

Amounts treated as dividends under Division 7A are generally not frankable, even though they are taken to be paid out of the private company's profits – see [Division 7A – franking implications](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-franking-implications). However, there are exceptions.

When an amount is taken to be a dividend under Division 7A because of an honest mistake or inadvertent omission, we have [discretion](https://www.ato.gov.au/businesses-and-organisations/corporate-tax-measures-and-assurance/private-company-benefits-division-7a-dividends/in-detail/division-7a-exercise-of-commissioner-s-discretion-under-section-109rb) to:

- disregard the deemed dividend (subject to conditions being complied with)
- allow the private company to choose to frank the dividend.

## Shareholder's or beneficiary's loan account

Each entry in a shareholder's or beneficiary's loan account needs to be analysed to determine what type of transaction it represents (that is, whether it is a payment, a loan or a debt forgiveness to which Division 7A applies). Additionally, entries representing loan repayments must be analysed to determine if they can be taken into account when working out the amount of a loan repaid or the minimum yearly repayment.

The balance of a shareholder's or beneficiary's loan account in the company or trustee accounts respectively may be in debit or credit at the end of the income year. Although a debit balance at the end of a year of income may indicate that there are loans that have not been repaid and a credit balance may indicate that no loans remain unpaid, neither result leads to the automatic conclusion that Division 7A does or doesn't apply.

If a private company has more than one shareholder's or beneficiary's loan account, the private company in calculating the Division 7A exposure cannot use a credit balance in one account to offset the debit balance in another account. Calculations of Division 7A loans are done in respect of transactions in the loan accounts of each individual shareholder.

The 'lender' is the private company or trustee who made the loan that is subject to Division 7A.


## Moving in

Your main residence is generally exempt from capital gains tax (CGT).

For CGT purposes, your home qualifies for the main residence exemption from the time you acquire it, provided you move in as soon as practicable.

If you buy your home, the 'time you acquire it' is the settlement date of the contract.

If:

-
**there is a delay moving in because of illness or other unforeseen circumstances** – your home is still exempt, provided you move in as soon as the cause of the delay is removed (for example, when you recover from the illness)
-
**you can't move in because the property is being rented to someone** – the property doesn't become your main residence until you move in
-
**you have not yet sold your old home** – you can treat both homes as your main residence for up to 6 months.

### Example: moving in as soon as practicable

Li Jing signed a contract to buy a townhouse in March. She took possession when settlement occurred in April.

In late March, Li Jing's employer sent her overseas on an assignment for 4 months. She moved into the townhouse when she returned in late July.

Li Jing's overseas assignment was unforeseen at the time she bought the townhouse. She moved in as soon as practicable after settlement of the contract. Therefore, she can treat the townhouse as her main residence from the date she acquired it.

If Li Jing treats the townhouse as her main residence for this period, she can't treat any other property as her main residence (except for a limited time if she is moving house).

End of example

##
[
]()Moving to another main residence

If you acquire a new home before you dispose of your old one, you can treat both as your main residence for up to 6 months.

You can do this if all of the following are true:

- you lived in your old home as your main residence for a continuous period of at least 3 months in the 12 months before you disposed of it
- you didn't use your old home to produce income (such as rent) in any part of that 12 months when it wasn't your main residence
- the new property becomes your main residence.

### Example: full exemption for both homes

Jill and Norman bought their new home under a contract that settled in January and they moved in immediately.

They sold their old home under a contract that settled in April.

Both the old and new homes are treated as their main residence for the period January to April, even though they did not live in the old home during that period.

End of example

### Exceeding the 6-month limit

If it takes longer than 6 months to dispose of your old home, the main residence exemption applies to both homes only for the last 6 months before you dispose of your old home.

For the period before this, when you owned both homes, you can choose which home to treat as your main residence. The other will be subject to CGT for that period.

#### Example: partial main residence exemption for one home

Jeneen and John bought their old home under a contract that settled on 1 January 2001 and moved in immediately. It was their main residence until they bought another home, under a contract that settled on 1 January 2024.

They kept their old home after moving into the new one. They didn't use the old home to produce income.

They sold the old home under a contract that settled on 1 October 2024. Jeneen and John owned this home for a total of 8,675 days.

Both homes are treated as their main residence for the period 1 April 2024 to 1 October 2024, the last 6 months that Jeneen and John owned their old home. One of the homes won't get the main residence exemption for 91 days from 1 January 2024 to 31 March 2024.

Jeneen and John have 2 options:

- They can claim the main residence exemption for their new home from the time they first move in. The capital gain on their old home is then partially assessable for CGT. The assessable proportion is multiplied by 91 ÷ 8,675, which is the number of days the old home was not their main residence divided by the total days they owned the old home.
- They can treat their old home as their main residence for the period 1 January 2024 to 31 March 2024, even though they have moved out. This means it is fully exempt. If they later sell their new home, it will be assessable for CGT for the 91-day period.

End of example

You can choose to continue [treating your former home as your main residence after you move out](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/your-main-residence-home/treating-former-home-as-main-residence). If you do this, you can't treat your new home as your main residence (except for up to 6 months while you are moving house).