Common tax myths debunked
Tax myths spread fast because they’re simple, and the real rules are… not. This guide calls out the big ones we hear from clients, including the “move back in for a year to wipe the CGT” myth.
Myth #1: “If I move back into the property for a year, I’ll get rid of the capital gains tax”
This is one of the most common (and costly) misunderstandings we see.
The reality: moving back in can help in some situations, but it generally doesn’t “erase” CGT. In most cases, CGT depends on how the property was used over your entire ownership period.
- If the property was your main residence for only part of the time you owned it, you usually only get a partial main residence exemption based on days.
- If you moved out and rented a former home, you may be able to choose to keep treating it as your main residence for CGT purposes for a period (often called the absence rule), but there are conditions — and it doesn’t apply in every scenario.
- If the property started life purely as an investment (rented from day one), moving in later generally doesn’t make the earlier rental period “disappear”.
You bought a home, lived in it, then moved out and rented it for a period. You kept good records and got advice early. Your final CGT position is worked out correctly (full or partial exemption depending on the facts).
Outcome: the claim is supportable, and you don’t get caught by a nasty “surprise” tax bill later.
You rented the property for years, then moved back in for 12 months, thinking that “resets” the CGT. When you sell, the ATO position is still based on your actual use over time, and you can end up with taxable periods.
Outcome: unexpected CGT, and often a scramble for valuations/records after the fact.
Simple way to think about it (illustrative only)
Other common myths we regularly debunk
Reality: if it’s income, it’s generally assessable whether it’s cash, bank transfer, or crypto.
Do instead: record it properly as you go. Undeclared income is one of the fastest ways to create ATO trouble.
Reality: deductions generally need a business/work connection and must not be private or domestic in nature.
Do instead: ask “Was this expense incurred to earn income?” and keep invoices that clearly show what was purchased and why.
Reality: travel between home and a regular workplace is usually not deductible (with limited exceptions).
Do instead: keep it clean: only claim travel that is genuinely work-related (client visits, work sites, etc.) and record the purpose.
Reality: for individuals, holding an asset for at least 12 months may make you eligible for the CGT discount — it reduces the capital gain, it doesn’t eliminate it.
Do instead: plan sales with timing in mind, but don’t assume “12 months = tax free”.
Reality: swapping one crypto asset for another can trigger a CGT event. It’s not just when you convert to Australian dollars.
Do instead: keep records of each disposal/swap (date, value, fees). Crypto tax is paperwork-heavy.
Reality: there are limited record-keeping concessions, but the ATO can still ask you to show how you calculated claims and that they’re work-related.
Do instead: keep digital copies. It takes seconds now, and saves headaches later.
Quick myth-busting checks
| Question | If the answer is “no”… |
|---|---|
| Do I have evidence? | Assume it’s not safely claimable until you can support it. |
| Is the expense clearly linked to income? | It’s likely private/non-deductible or only partly deductible. |
| Have I mixed private and investment use? | Expect apportionment and extra record-keeping. |
| Am I relying on a “one weird trick”? | Pause and get advice. That’s how people accidentally create tax problems. |