Selling the family holiday home

There are many considerations when it comes to selling a family holiday home such as pricing, timing, marketing, and even whether to actually sell that special place that may have been full of wonderful family memories.

But if you do decide to sell, the capital gains tax (CGT) consequences, and any special rules that may apply, are something that will need close consideration.

These rules include, among other things:

  • although a holiday home is used for “personal use and enjoyment” it is not subject to any special calculation restrictions that apply to “personal use” assets under the tax law (eg the denial of capital losses);
  • if the holiday home was acquired on or after 20 August 1991, then costs of owning it (eg mortgage interest and rates) can be included in its “cost” for CGT calculation purposes, but subject to meeting the important CGT record keeping requirements;
  • if you are carrying on an “Airbnb business”, you may be able to claim CGT concessions using certain CGT business exemptions on the sale of the home (but this may be very difficult to establish);
  • if the holiday home was ever used as by its owner as a main residence or their home, a full or partial CGT exemption may be available, but at the expense of losing the CGT main residence exemption for that period on any other home they may own;
  • as with all real estate, the CGT consequences of dealing with the sale of a holiday home apply individually to each joint owner;
  • if the holiday home is owned by a foreign resident (for tax purposes) then it is also subject to CGT but at a higher rate of tax for foreign residents and without the benefit of the full CGT “discount”; and
  • a holiday home may be entitled to the full exemption for inherited homes on the death of its owner, but only if it was acquired by the deceased person “pre-CGT” (ie before 20 September 1985), otherwise it may be fully subject to CGT.

So, if you are thinking of selling your holiday home these are just a few of the CGT issues you should discuss with your adviser.