Private ruling: Capital gains tax - main residence
Date of advice: 24 November 2015
Published: January 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a partial main residence exemption from capital gains tax on disposal of your property? | A1: Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 110-25(5) | Income Tax Assessment Act 1997 Section 118-110

Reasons for decision: Detailed Reasoning - Partial main residence exemption: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you can disregard any capital gain or loss realised on the disposal of a dwelling that was your main residence for your entire ownership period. If a capital gains tax (CGT) event happens to a dwelling you acquired on or after 20 September 1985, and that dwelling was your main residence but not for the whole time you owned it, you are entitled to a partial exemption. In these cases, a capital gain or loss is determined by reference to that part of the whole of the period of ownership during which the dwelling was not the taxpayer's sole or principal residence. It is not determined according to any increase or decrease in value of the dwelling during the period it was not the taxpayer's sole or principal residence. The method to calculate the taxable portion of the capital gain where you are entitled to a partial exemption is detailed in section 118-115(2) of the ITAA 1997. The part of the capital gain that is taxable is calculated as follows: Total capital gain made from the CGT event | Detailed Reasoning - x: number of days in your ownership period when the dwelling was not your main residence total number of days in your ownership period There is no discretionary power included in the taxation legislation which would allow the Commissioner to permit you to completely disregard your capital gain. Accordingly, you are required to use the method above to calculate your capital gain.

Relevant facts: In 20XX you and your spouse purchased a house. At time of purchase the house was tenanted. These tenants vacated the house after a short period of time and you received rental income for this time. | You and your spouse took up residency and moved in a short time later, and the house remained your main residence until it was sold in 20YY. | You carried out improvements to the house after the tenants had vacated and before you had moved in, and also while you resided in the house. | You incurred buying and selling costs that included government charges, commissions and bank fees.