Private ruling: Capital gains tax - absence rule
Published: July 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Questions and answers | Are you entitled to fully disregard the capital gain or loss on the disposal of your property? | No. | Are you entitled to partially disregard the capital gain or loss made on the disposal of your property? | Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 subdivision 118-B

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or loss as a result of a capital gains tax (CGT) event happening to a CGT asset. CGT assets include real estate acquired on or after 20 September 1985. You make a capital gain if your capital proceeds from the sale of your CGT asset are greater than your cost base for the purchase of that asset, for example, if you received 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 your capital proceeds resultant from the sale of that asset. Main residence exemption The main residence exemption under subdivision 118-B of the ITAA 1997 may allow to you to disregard all or part of any capital gain or capital loss you made from a CGT event that happens to your ownership interest in a dwelling where you have elected the dwelling to be your main residence. Generally, if you are an individual you can ignore a capital gain or capital loss from a CGT event that happens to your ownership interest in a dwelling that you have elected as your main residence. To get the full exemption from CGT: · the dwelling must have 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 on and adjacent to must be 2 hectares or less. You only get a partial exemption for a CGT event that happens in relation to your ownership interest in a property if the dwelling was your main residence for only part of your ownership period. | Detailed Reasoning - Moving into a dwelling: A dwelling is considered to be your main residence from the time you acquired your ownership interest in it if you moved into it as soon as practicable after that time. If you purchased the dwelling this would generally be the date of settlement of the purchase contract. However, if there is a delay in moving in because of illness or other unforseen circumstances, the exemption may still be available from the time you acquired your ownership interest in the dwelling. If you could not move in because the dwelling was being rented to someone, you are not considered to have moved in as soon as practicable after you acquired your ownership interest. | Detailed Reasoning - Your circumstances: For a period you rented the dwelling and elected another property as your main residence. For another period you lived in property A and elected it as your main residence up until you purchased property B. For a later period you rented the dwelling and elected property B as your main residence. In your case you are entitled to a partial main residence exemption. The main residence exemption will only apply to the period of time that you were actually living in property A up until the date of purchase of property B. As you did not elect property A to be your main residence outside of this time, you are not entitled to a main residence exemption for the remainder of your ownership period. Further, as property A was occupied by tenants from the date of purchase for a period, you are not considered to have moved in as soon as practicable so a main residence exemption would not be available for this period even if the property was elected as your main residence. To work out your capital gain or loss, please refer the Guide to capital gains tax 2011-12 at www.ato.gov.au

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. | Relevant facts: You purchased property A after 19 September 1985. | You are the sole owner of the dwelling on the title of the property. | The dwelling had tenants living in it when you bought it. | You rented the dwelling from when you first purchased it for a period. | You lived in the dwelling for another period. | You rented the dwelling for a later period. | You did not use the dwelling to produce assessable income during the period of time you were living in it. | You owned another property that you elected as your main residence up until you moved into property A. | You elected the dwelling to be your main residence from when you moved into it until the purchase date of your new property (property B). | The land on which the dwelling is situated on and adjacent to is less than 2 hectares. | During your ownership of this dwelling you also owned an investment property. | When you moved out of property A you moved straight into a new dwelling (property B). | From the purchase date of property B, you chose to treat property B as your main residence. Your de facto partner also chooses this property as their main residence.