Private ruling: Capital gains tax
Published: September 2011
Ruling period: Year ended 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Question and answer | Are you entitled to disregard in full the capital gain made on the disposal of your dwelling where your period of absence is less than six years? | Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You purchased a residential property after September 1985. The property was situated on less than 2 hectares of land. You moved into the property as soon as practicable after settlement. The property remained your main residence until it was rented out. While the property was being rented out you moved to rental accommodation. You elected to treat the property as your main residence after you vacated. No other property has been your main residence during this period. You sold the property less than six years from the date it was first rented out. You made a capital gain on the sale.

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

Reasons for decision: Detailed Reasoning - Main residence exemption: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) advises that you can fully disregard a capital gain or capital loss made from a capital tax (CGT) event that happens to your main residence. To obtain the full exemption from CGT: · the dwelling must be been your home for 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 or less. | Detailed Reasoning - Absences: Section 118-145 of the ITAA 1997 allows you to continue to treat a dwelling as your main residence even if you stop living in it. You cannot make this choice for a period before a dwelling first become your main residence. If you leave the property and use it to produce assessable income, the maximum period that you can continue to treat it as your main residence is six years after you stop living in it. If you make this choice, you cannot treat any other dwelling as your main residence during the same period. This choice needs to be made only for the income year that the CGT event happens to the dwelling. As the property was your main residence and you elected to treat it as your main residence from the time you moved out until you sold it (a period of less than six years), you are entitled to a full main residence exemption.

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.