Tax Updates: 17 June 2024

Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion on any national or international tax issues, please contact Richard via email at [email protected].


Main home – which one?

With July 1 fast approaching, which will see the residential land bright-line period reduce back to two years, IR has released QB 24/01, titled ‘If a person has two or more homes, which home is their main home for the purpose of the main home exclusion to the bright line test?’


Now, you’ll appreciate that this is not the first publication on the topic. Absent the forthcoming legislation change, I’d suggest that the commentary is very similar to the earlier versions.

So, here are things to note:

  • As much as you may wish to argue otherwise, you can only have one main home for the purpose of claiming the legislative exclusion, and it will be the one with which you are seen (objectively) to have the greatest connection. The QB provides several factors to consider – questions along similar lines which you would be asking yourself if undertaking a tax residency permanent place of abode analysis;
  • You need to consider the definition of a residence – a place where a person has settled, where they ordinarily eat, live and sleep. It is a place the person uses as a base for their daily activities and is the seat of their domestic life and interests. Your holiday home at the beach, consequently, will not satisfy the definition;
  • It’s a ‘use’ test, not an ‘intention’ test – so it’s no good trying to claim the main home exclusion for residential land which you intended to use for your main residence but didn’t get around to doing so;
  • You don’t actually have to own the land before it is considered a ‘main home’ – rented accommodation will also qualify, which could have the consequence of exposing the land that you do, in fact, own to bright-line taxation and,
  • Remember that we are now returning to the old 50% tests – so you’re either in or out, nothing in between. So, the residential land itself must be used more than 50% for dwelling, and the dwelling must have been used as your main home for more than 50% of the time you have owned the land (although note now the construction period carve-out if applicable).

QB 24/01 is a simple 11-pager to read and contains several examples towards its conclusion to help illustrate the narrative.


Ok, but what if I’ve had flatmates?

And hard on the heels of QB 24/01, is QB 24/02, titled ‘Income tax – bright-line test – main home exclusion – renting to flatmates’.

So, you have established which home is your main home (or you only have one in any event, so you do not have to ask yourself that question), but you’ve had flatmates in to help you manage through the present cost of living crisis. Does that factor alone then negate your ability to claim the main home exclusion?

Well, according to QB 24/02, unless the main purpose of having flatmates in your home is to carry on a rental activity, it is likely that the main home exclusion will still be claimable.

Firstly, you will have already reached the point where you’ve determined that the land has been used more than 50% for a dwelling. Having a flatmate will never change that determination – the dwelling either uses more than 50% of the residential land or does not (note that the surrounding curtilage comes into this equation).

Consequently, the remaining element to satisfy is that the dwelling has been used mainly as your residence for more than 50% of the time you have owned the land. QB 24/02 suggests that in the majority of cases where you have flatmates, this test will still be satisfied unless:

  • Your purpose of having flatmates is to make a profit from the rental activity, as opposed to simply having them there to help defray the costs of home ownership;
  • You actually limit your space in the dwelling which you can use to less than 50% (unlikely when you take the common use areas into account); or,
  • The scale of your activity (so a large number of flatmates) may suggest that it is significant enough to be similar in nature to a ‘boarding establishment’; therefore, the dwelling is unable to be used mainly as your residence, although note here that a ‘boarding establishment’ will not be considered a dwelling and therefore will not be subject to the bright-line test.

QB 24/02 is 9 pages in length and contains a single example at its conclusion.


This article was originally published through the ‘A Week In Review’ newsletter. If you would like to receive Richard’s tax updates every Monday morning, you can subscribe here.

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