Private ruling: CGT main residence exemption
Date of advice: 18 March 2026
Published: 11 May 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Are you entitled to a full main residence on the property? | A1: No. | Q2: Are you entitled to a partial main residence exemption on the property? | A2: Yes.

Relevant facts and circumstances: You and your spouse signed the contract to purchase a home whilst on a family holiday. You and your spouse took out home insurance on the State X property. You and your spouse paid the deposit on the State X property. Settlement for the State X property took place a few weeks after you paid the deposit. You and your spouse rented out the State X property and signed a rental agreement. Your spouse signed an employment contract with an employer in State X. You and your children remain living in State Z. The State X government closed the state border to State Z due to COVID restrictions. Your spouse entered hotel quarantine in State X. Your spouse left hotel quarantine and stayed with a friend. Your spouse began work with the State X employer. The States X government announced that the state border will open to State Z. Your spouse paid the deposit to the removals for interstate move of your furniture. Your spouse took out an internet contract for the State X property. Your spouse returned to State Z to help you pack up the unit and prepare for the move to State X. Your spouse connected the electricity to the State X property. The removalists picked up your furniture and transported it to State X. You and your spouse along with your children travelled to State X when the State X border opens to State Z residents. You all stay with friends for a night before moving into the State X property. The lease ended for the tenant at the State X property. You and your family move into the State X property without furniture. Your furniture was delivered to the State X property the removalists. Your children were enrolled in a State School. You and your spouse stop living in the State X property, and you both return to State Z to live separately. The State X property was leased to a third party. The State X property is later leased to a second third party. You and your spouse sign a contract to sell the State X property. The second third party vacates the State X property. The State X property was sold via private sale. The sale of the State X property is settled. You and your spouse elect to treat the State X property as your main residence under Section 118-145 of the ITA 1997 for the relevant period.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 section 118-185

Reasons for decision: Summary: You make a capital gain or loss because of a capital gains tax (CGT) event happening to a CGT asset. CGT assets include real estate acquired on or after 20 September 1985. CGT events are those transactions that occur to a CGT asset that result in you either making a capital gain or capital loss. You make a capital gain if your capital proceeds from the sale of a CGT asset are greater than the cost base for the purchase of that asset, for example, if you receive more for an asset than you paid for it. You make a capital loss if your reduced cost base for the purchase of that asset is greater than the capital proceeds resulting from the sale of that asset, for example, if you receive less for an asset than you paid for it. Capital gains tax is not a separate tax; it forms part of your assessable income and is taxed at your marginal tax rate. | Detailed Reasoning - CGT main residence: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling that is your main residence. To qualify for full exemption, the dwelling must have been your main residence for the whole period you owned it, the ownership period, and must not have been used to produce assessable income. As the State X property was not your main residence for the whole of your ownership period you cannot have a full main residence exemption on the property. You did not move into the State X property when it settled. You and your spouse rented the State X property as you and your family were not ready to move from State Z to State X until your spouse had secured new employment in State X. The State X property was rented for several months. You and your family move into the State X property and commence treating it as your main residence. Your furniture is moved into the State X property. The question remains as to whether you established the property as your main residence for the period you were staying there. Whether a dwelling is your main residence depends on the actions of you and your family. Generally, a dwelling is your main residence if: • You and your family live in it • Your personal belongings are in it • It is the address your mail is delivered to • It is your address on the electoral roll • Services such as gas and power are connected. The length of time you stay in the dwelling and whether you intend to occupy it as your home may also be relevant. In this sense, your intentions can help to explain your actions or affect the weighting given to certain actions over others. However, your intentions are not a substitute for your actions. In Couch & Anor v Federal Commissioner of Taxation [2009] AATA 41 at paragraph 14, the Tribunal confirmed that the 'mere intention to occupy a dwelling as a sole or principal residence, but without doing so, is insufficient to obtain the exemption.' Where a full exemption is not available, you may be entitled to a partial exemption under section 118-185 of the ITAA 1997. You calculate your capital gain or capital loss as follows: Capital gain or capital loss amount x Total days non-main residence days / total number of days you are entitled to a partial main residence exemption It is accepted that you and your family moved into the State X property and commenced treating it as your main residence until you moved out of the property and returned to State Z. You make the election to treat the property as your main residence for the relevant period until it was sold under the Absence rule under Section 118-145 of the ITA 1997. You and your spouse were treating no other property as your main residence for this period. You are entitled to a partial main residence on the sale of the State X property.