Private ruling: Capital gains tax (CGT) - main residence exemption
Published: June 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 19XX

Ruling: Q1: Are you entitled to disregard the capital gain on the sale of your Australian dwelling? | A1: Yes.

Relevant facts and circumstances: You are citizens of another country. You purchased a dwelling in 19XX. You moved into the dwelling on the date of purchase and stayed there for 90 days of each year until it was sold in early 2014. At all other times the dwelling was available for rent to the public via management agents. You furnished the dwelling when you initially moved in and brought your own personal belongings. The dwelling remained furnished when it was used as a rental. During each later stay you brought your personal belongings and spent money upgrading the furnishings in the dwelling. You paid all the bills related to the dwelling, and received some of your mail to the address. You owned a second dwelling in another country that you lived in for part of the ownership period of the dwelling. You have not treated this dwelling as your main residence. You have resided in a retirement village in another country for the past 5 years. You have no ownership in this dwelling, only a right of residence. You wish to treat the dwelling as your main residence for your entire ownership period.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 118-B | Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 section 118-185 | Income Tax Assessment Act 1997 section 118-190

Reasons for decision: Summary: Generally, you can disregard a capital gain or capital loss from a CGT event that happens to a dwelling that is your main residence (section 118-110 of the ITAA 1997). However, in order to obtain a full exemption from CGT, the dwelling must have been your main residence for the entire period you owned it (section 118-110 and 118-185 of the ITAA 1997), must not have been used to produce assessable income (section 118-190 of the ITAA 1997) and any land on which the dwelling is situated should not be more than two hectares. If you own more than one dwelling during a particular period, only one of them can be your main residence at any one time. In some cases, you can choose to treat a dwelling as your main residence even though you no longer live in it. The absence provision under section 118-145 of the ITAA 1997 allows a dwelling that has qualified as your main residence to continue to be treated as your main residence during a period of absence from the dwelling. Where the concession is chosen, a dwelling can be treated as your main residence for a maximum period of 6 years of absence when the dwelling is being used to produce assessable income. The period starts from the date you move out of the dwelling and will include any period during which the property is left vacant while it is advertised for tenants. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence. Furthermore, for this exemption to apply it must be established that a property is or has been your main residence. Whether a dwelling is an individual's principle residence depends on the facts of each case. The factors to be taken into account include: • The length of time you live there - there is no minimum time a person has to live in a home before it is considered to be their main residence • Whether your family lives there • Whether you have moved your personal belongings into the home • The address to which your mail is delivered • Your address on the electoral roll • The connection of services (for example, phone, gas, electricity, internet, pay TV etc) • Your intention in occupying the dwelling. A mere intention to construct or occupy a dwelling as your main residence - without actually doing so - is not sufficient to obtain the exemption. In your case, you moved into the dwelling on the date of purchase. You furnished the dwelling, moved your personal belongings into the dwelling, had mail delivered to the dwelling, and paid for services connected at the dwelling. It was your intention to occupy the dwelling as your main residence during each 90 day period of stay. It is considered that the dwelling became your main residence on the date of purchase, and again during each 90 day period of stay in the following years. The dwelling was not your main residence whilst it was available for rent, however, you are able to apply the absence provision to the dwelling. As the dwelling became your main residence within 6 years of each time it ceased being your main residence the absence provision can be applied to the entire ownership period of the dwelling. Therefore, you can choose to treat the dwelling as your main residence for the period 19XX to early 2014, and disregard the capital gain made on the sale of the dwelling.