When you buy a house & its tenanted do you get screwed tax wise?

Question

I ask cause we are buying a house but the tenant will live there for a few more months & we will reap the rental income but wont this be bad tax wise or if we were to sell a couple years later? Cause it was an investment property for the first couple of months on ownership?

Im sure someone will be able to explain this better for me?

Answer 1

You are correct that you will not be able to get the full main residence exemption for those months whereby the tenants are still there. You need to move in by the time it is practicable for you to move in to be able to claim a full main residence exemption. I understand that having a tenant in the property is not one of the reasons that is accepted.

Having said the above, I don't know whether you are necessarily screwed tax wise. You only have to pro rata those few months in calculating your assessable capital gains when you sell your property.