Private ruling: Capital gains tax - main residence - two dwellings - disposal
Published: November 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the capital gain made on the sale of your interest in your property disregarded in full? | A1: No.

Relevant facts and circumstances: You acquired an interest in a property as a joint tenant from party A after 20 September 1985. Prior to you acquiring your interest in the property, a dwelling (dwelling A) was constructed on the land, with completion of the dwelling occurring after a period of time. This dwelling was occupied by party A and cost an amount to construct. A second dwelling (dwelling B) was constructed on the land, with completion occurring after a period of time at a cost of an amount to construct. You occupied dwelling A for a period of time, while dwelling B was under construction. Dwelling B was occupied by you from completion until the sale of the land and dwellings in the 2012 income year. The sale of the land and dwellings has resulted in a capital gain.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 108-7 | Income Tax Assessment Act 1997 Section 112-20 | Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-120.

Reasons for decision: Summary: Capital gains tax (CGT) is the tax you pay when a CGT event happens to a CGT asset, such as land. The most common CGT event is CGT event A1, which occurs when you dispose of an asset, or interest in an asset to another party. | Detailed Reasoning - Tenants in common: Individuals who own a CGT asset as joint tenants are treated as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common. Tenancy in common is a type of co-ownership where two or more persons own interests in the same piece of property. The tenants in common hold undivided shares, possessing the property in common and without exclusive possession of any part of it. Taxation Ruling IT 2485 states that where a dwelling is not the sole or principal residence of all joint owners, the exemption provided on disposal (main residence exemption) is available only to the joint owner or each joint owner who occupied the dwelling as his or her sole or principal residence in respect of his or her share in the dwelling. In your situation, as a joint tenant occupying dwelling B as your main residence you will benefit from the main residence exemption in respect of that interest in the dwelling. Any other joint tenants not occupying that dwelling as their main residence will be subject to CGT on their interest in the dwelling. As dwelling B was your main residence and you have not resided in dwelling A as a main residence any capital gain or capital loss made on the disposal of your interest in dwelling A is not disregarded. | Detailed Reasoning - Note:: The main residence exemption that applies to your interest in a dwelling also exempts 2 hectares of your interest in land that is adjacent to your dwelling.