Private ruling: Capital gains tax - Main residence exemption/foreign country dwelling
Published: August 2012
Ruling period: Year ended 30 June 2013. | Year ended 30 June 2014.
Date scheme commenced: 1 July 2012

Ruling: Q1: Will a capital gain or capital loss made on the disposal of your overseas property be disregarded? | A1: Yes.

Relevant facts and circumstances: You jointly purchased an overseas property after 20 September 1985. The property was a two-bedroom second floor apartment within a small residential complex. This was used as your principal residence for the entire period between purchase and migration to Australia. The property was never used to derive income and all maintenance costs have been borne entirely by you. You have made an election to continue to treat the overseas property as your main residence during your period of absence. You have since resided in Australia with the exception of several overseas holidays of two to three weeks duration. Shortly after you migrated to Australia, your widowed parent took up residence in your overseas home, having left their previous homeland with very little financial security. Your parent has now lived in the property rent-free for a number of years and continues to live there. Your parent is now suffering from age related health conditions such as poor memory and physical difficulties. As a result, your parent will need to be placed in a retirement facility and the property will be sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 103-25(1), | Income Tax Assessment Act 1997 Subsection 103-25(2), | Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Subsection 118-145(1) and | Income Tax Assessment Act 1997 Subsection 118-145(4).

Reasons for decision: Summary: A capital gain or loss made on the disposal of your overseas dwelling is disregarded as it was your main residence for your entire ownership period. It was your main residence for the entire period because you physically occupied it from purchase and you will choose to continue to treat the dwelling as your main residence after you vacated it. As you will make this choice, you cannot treat another dwelling as your main residence for the same period. In effect, by making this choice, you are unable to claim a main residence exemption for your second property you owned in Australia for a number of years.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.