For most Australians, the smartest investment decision of all is to buy a family home. One reason why is that when it comes to sell, no capital gains tax is payable on the sale proceeds.

Family homes have always been exempt from tax when they are sold. This exemption was both preserved and restricted when capital gains tax was introduced on 20 September 1985. The restrictions include: moving into the new home as soon as practicable, a time limit of six years after moving out (without buying a new home), and ownership in personal names (not in the name of a company or trust). If the restrictions are not observed, capital gains tax is payable.

Family homes used to be subject to inheritance taxes (death duties and estate duties) when the house was inherited. But inheritance taxes were abolished in the early 1980s and were not replaced except in one instance: If the family home is inherited and is not sold within 2 years of the date of death, then capital gains tax is payable on the increase in value from the date of death. The 2 year time limit does not apply (and no tax is payable) if the home becomes owner-occupied or if the home was purchased before 20 September 1985.

Family homes are exempt from land tax.

And when it comes to retirement, family homes have a special status for the age pension means test: they are not counted as an asset, no matter what their value.

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