Private ruling: capital gains tax - main residence - absence choice
Published: November 2013
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1:  | A1: 

Relevant facts and circumstances: After 20 September 1985, you purchased a dwelling (dwelling A) as your primary place of residence. Approximately five years later you moved interstate as your employer could no longer employ you and you found work there. You rented a dwelling in the vicinity of your new employment. You rented out dwelling A. The following year you purchased a dwelling at your new location (dwelling B) as your employment was ongoing. Three years later you found employment in your home state and you returned dwelling A. You disposed of dwelling B and included the capital gain made on its disposal in your income tax return for relevant income tax year. You will elect to treat dwelling A as your main residence for your entire ownership period. You will dispose of dwelling A.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-145

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. The most common capital gains tax (CGT) event, CGT event A1, which occurs when you dispose of a CGT asset. The time of the event is when you enter into the contract for the disposal or if there is no contract - when a change of ownership occurs. CGT event A1 will occur when you dispose of Dwelling A. | Detailed Reasoning - Main residence: Generally, you can ignore a capital gain or capital loss from a CGT event that happens to your ownership interest in a dwelling that is your main residence. To get the full exemption from CGT: · the dwelling must have been your home from the whole period you owned it · you must not have used the dwelling to produce assessable income, and · any land on which the dwelling is situated must be two hectares of less. | Detailed Reasoning - Continue main residence status after dwelling ceases to be your main residence: In some cases, you can choose to treat a dwelling as your main residence even though you no longer live in it. You cannot make this choice for a period before a dwelling first becomes your main residence. This choice needs to be made only for the income year that the CGT event happens to the dwelling, for example, the year that you enter into a contract to dispose of it. If you make this choice you cannot treat any other dwelling as your main residence for that period (except for a limited time if you are changing main residences). If you use the dwelling to produce income - for example, you rent it out or it is available for rent - you can choose to treat it as your main residence for up to six years after you stop living in it. If you make this choice the dwelling is full exempt. | Detailed Reasoning - How it applies to your situation: In your case, you are entitled to the full main residence exemption as dwelling A was used to produce income for less than six years and you have elected to continue to treat it as your main residence for your entire ownership period. Therefore, any capital gain or capital loss made on the disposal of dwelling A is disregarded.

Subject: capital gains tax - main residence - absence choice: Question : Is the capital gain or capital loss made on the disposal of your main residence disregarded?