Private ruling: CGT-main residence and absence choice
Date of advice: 20 September 2017
Published: February 2018
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a full main residence exemption on the sale of your ownership interest in the dwelling? | A1: No | Q2: Are you entitled to a partial main residence exemption on the sale of your ownership interest the dwelling? | A2: Yes

Relevant facts and circumstances: You and your siblings each purchased equal shares in a dwelling (the dwelling). After traveling for some time, you moved into the dwelling approximately one year after purchase and established it as your main residence. Your work resulted in you working in locations throughout Australia, returning to the dwelling after the completion of each project. You later moved out of the dwelling to pursue work elsewhere. You elected to treat the dwelling as your main residence during this period. You returned to your dwelling in some time later and lived there for a number of years. Sometime later, one of your siblings married and purchased the shares in the dwelling from your other siblings. You, your sibling and your sibling’s spouse lived in the dwelling for a number of years. During this period you spent extended periods away from your dwelling completing contract work, but returned to your dwelling at the end of each contract and during weekends. Sometime later, you accepted work in another state and wished to treat the dwelling as your main residence during your absence. You later worked near your home and returned to your dwelling on weekends and during holidays and between contracted roles. You returned regularly to be with your partner. You recently sold your interest in the dwelling to your sibling living in the dwelling. The dwelling has not been used to produce income. You did not own any other property that you treated as your main residence.

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

Reasons for decision: Summary: You will be able to treat your ownership interest in the dwelling as your main residence from the date you established it as your main residence until it was sold to your sibling. You are eligible for a partial main residence exemption. | Detailed Reasoning - Detailed reasoning: A capital gain or capital loss will occur when a capital gains tax (CGT) event happens to a CGT asset. The most common CGT event is CGT event A1 which occurs when a CGT asset is disposed of. Generally, you can fully disregard a capital gain or capital loss made on the sale of a dwelling that is your main residence if: ● the dwelling was your home for the whole period you owned it ● the dwelling was not used to produce assessable income; and ● any land on which the dwelling is situated is not more than 2 hectares. Subsection 118-145 of the ITAA 1997 allows you to make a choice that a dwelling continues to be treated as your main residence even though it has ceased to be so. The choice can be made for a total of six years where the dwelling was used for the purpose of producing assessable income, or indefinitely where it was not used for this purpose. You are entitled to another maximum period of six years each time the dwelling again becomes and ceases to be your main residence. | Detailed Reasoning - Partial main residence exemption: Section 118-185 of the ITAA 1997 states that if a dwelling was your main residence for only part of your ownership period, you will only get a partial exemption for a CGT event that occurs in relation to the dwelling. The capital gain or loss is calculated using the following formula: Total capital gain or loss x Non-main residence days Total days in your ownership period Where: ● non-main residence days is the number of days in your ownership period when the dwelling was not your main residence, and ● the ownership period for capital gains tax purposes is from the date of settlement of the contract to purchase the property until the date of signing of the contract of sale of the property. | Detailed Reasoning - Application to your circumstances: In your case, you will be entitled to a partial main residence exemption on your ownership interest when the interest was sold. You are able to treat the dwelling as your main residence from when you moved in, to the time you sold your interest in the dwelling. As you did not occupy the dwelling from the date of purchase until it became your main residence sometime later, these days will be included in the above formula as your non main residence days. The total days in your ownership period includes the days from the date of purchase to the date you sold your interest in the dwelling.