Private ruling: Capital gains tax
Published: May 2013
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2012

Ruling: Questions and answers | 1. Are you entitled to a full main residence exemption upon the sale of the dwelling? | No. | 2. Are you entitled a partial main residence exemption upon the sale of the dwelling? | Yes.

Relevant facts and circumstances: You purchased the property several years ago with a tenant in situ. The property was rented for a number of years. You then moved into the property after selling your previous main residence.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-110. | Income Tax Assessment Act 1997 Subsection 118-145(2). | Income Tax Assessment Act 1997 Section 118-192.

Reasons for decision: Detailed Reasoning - Capital gains tax (CGT): A capital gain or a capital loss is made if and only if a capital gains tax (CGT) event happens to a CGT asset (section 100-20 ITAA 1997). Land and buildings are specifically listed as CGT assets (section 100-25 ITAA 1997). The disposal of a CGT asset causes a CGT event A1 to happen. You dispose of an asset when a change of ownership interest occurs from you to another entity. The time of the event is when you enter into the contract for the disposal or if there is no contract when the change of ownership occurs (section 104-10 ITAA 1997). A capital gain occurs if the capital proceeds from the disposal are more than the asset's cost base. A capital loss occurs if those capital proceeds are less than the asset's reduced cost base (section 100-35 ITAA 1997). In your case, a CGT event will occur when you dispose of the property. | Detailed Reasoning - Main residence exemption: The main residence exemption provides that the capital gain or capital loss that is made from the disposal of a dwelling or the ownership interest in it will be disregarded if the person is an individual, and the dwelling was the main residence throughout the ownership period (section 118-110 ITAA 1997). In your case, you are not entitled to a full main residence exemption as the dwelling was not your main residence for the entire ownership period. | Detailed Reasoning - Partial main residence exemption: If a CGT event happens to a dwelling if one acquired on or after 20 September 1985, and that dwelling was not the main residence for the whole time it was owned, a partial exemption is allowed. In your case, you are entitled to a partial exemption as the dwelling was your main residence for part of your ownership period (sub-section 118-185 (1) ITAA 1997). To calculate your capital gain or capital loss on the property the following formula must be used (sub-section 118-185(2) : Capital gain or Capital loss x Non-main residence days Days in your ownership period Capital gain or capital loss means the total capital gain or capital loss you would have made from the CGT event if the main residence exemption had not applied. Non-main residence days mean the number of days in your ownership period when the dwelling was not your main residence. Days in the ownership period means the total number of days in your ownership period.