Selling Your House Australian

The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

Exempting the Principal Home – Sale Proceeds (for homes sold on or after 01/01/2023)

Note: The information on this page applies to homes sold on or after 1 January 2023. For information on the sale proceeds exemption for homes sold before 1 January 2023, see 4.6.3.80.

Summary

This topic covers the following and applies to homes sold on or after 1 January 2023:

The Definition of Principal Home Sale Proceeds

Principal home sale proceeds can include:

• Funds from the sale of the principal home that are held in a financial investment, which the income support recipient intends to be applied to purchase, build, rebuild, repair or renovate a new principal home.
• Payments that have been applied to build, rebuild, repair or renovate a new principal home.

Intention to Apply Sale Proceeds

Only the value of principal home sale proceeds that are intended to be used to purchase, build, rebuild, repair or renovate a new principal home can be exempt under the assets test.

Example: Geoff sells his principal home for $650,000. Geoff intends to purchase a new principal home for $550,000 and to spend $100,000 on establishing a new business venture. Given Geoff only intends to use $550,000 of the sale proceeds to purchase a new principal home, the total amount of sale proceeds that can be exempt from the assets test is $550,000. The $100,000 is NOT exempt from the assets test.

Application of Sale Proceeds

The value of principal home sale proceeds that have been applied to build, rebuild, repair or renovate a new principal home can be exempt under the assets test. This could include the value of:

• The residence or partially finished residence that is in the process of being built, rebuilt, repaired or renovated.
• A structure on the land to the extent that the structure was built before the person began applying the sale proceeds.
• Land on which the new principal home is to be built, rebuilt or repaired. Land that was purchased prior to receiving the sale proceeds (whether owned outright or mortgaged) can be exempt once the principal home sale proceeds have been received.

Example: Aya purchased a block of land for $150,000 prior to selling her principal home. Aya sells her principal home, and $750,000 was received on 30 January 2023 at settlement. Aya uses the money to pay off the mortgage on the block of land. The balance of the settlement money is placed into a bank account. Aya intends to use the settlement money to build a home on the block of land. In this case, the block of land and the money in the bank account can be exempt from 30 January 2023. The lower deeming rate will apply to the sale proceeds that remain in the bank during the sale of proceeds exemption period.

The maximum total asset value that may be exempt is the value of the proceeds of the sale of the former principal home.

Example: The maximum asset value that Aya can have exempted is $750,000, which includes the value of the block of land.

For couples, where one member of the couple intends to or has applied the proceeds, then their partner will also be regarded as intending to apply, or having applied the proceeds.

When the Principal Home Sale Proceeds Exemption Can Apply

The principal home sale proceeds exemption only applies if:

• A person sells their principal home.
• The person does not have a right or interest in their principal home, or
• That right or interest does not give the person reasonable security of tenure.

Example: Joan sells her principal home and intends to use the sale proceeds to build a new home. Joan moves into another home that she owns. Joan cannot gain a principal home exemption on the home she is living in as well as having the sale proceeds exempt from the assets test. In this case, Joan intends her principal home to be the one she builds with the sale proceeds. Therefore, given Joan does not intend the home she is currently living in to be her principal home, it will be assessed as an asset. The sale proceeds that will be used to build her new principal home will be exempt from the assets test.

For more information on selling your house in Australia, please visit https://downunderrealty.com.