Private ruling: CGT - main residence
Date of advice: 15 November 2024
Published: 13 January 2025
Ruling period: Year ended 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Can you apply the main residence exemption provided under section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) to disregard the capital gain or loss on the sale of the property? | A1: Yes. Generally, a CGT event that occurs to a taxpayer's main residence is disregarded under subsection 118-110(1) of the ITAA 1997 if they are an individual, the dwelling was their main residence throughout the ownership period and the interest did not pass to them as a beneficiary in, and they did not acquire it as a trustee of, the estate of a deceased person. Subparagraph 118-130(1)(c)(ii) of the ITAA 1997 specifies that you have an ownership interest in a flat or home unit if you have a licence or right to occupy it. A taxpayer can choose to continue to treat a dwelling that was their main residence as their main residence under section 118-145 of the ITAA 1997. If the dwelling is used to produce income in the taxpayer's absence, the maximum period that the taxpayer can choose to treat it as their main residence is six years as per subsection 118-145(2) of the ITAA 1997. If they do not use the dwelling to produce income then they can treat the dwelling as their main residence under section 118-145 indefinitely as per subsection 118-145(3) of the ITAA 1997. If a taxpayer chooses to continue treating the dwelling as their main residence in their absence under section 118-145, they cannot treat any other dwelling as their main residence during that period.

Relevant facts and circumstances: In xx 20xx you moved from xx to xx to be closer to your child and grandchildren. Your household items and furniture were placed in storage in xx. You stayed with your child, and, on occasion, had respite care at a retirement village. You were charged for nightly accommodation while in respite care. On xx xx 20xx you purchased a property at xx xx xx (the property). The property is less than 2 hectares. In xx 20xx your child arranged the removal of your household items from storage to the property. On xx xx 20xx you moved into the property and it became your main residence. You had utilities connected, obtained home and contents insurance and updated your mailing address with your bank. On xx xx 20xx you underwent an aged care assessment that determined you had a medical condition. Your child sought a lease arrangement with the retirement village accommodation for your permanent care. Between xx xx 20xx and xx 20xx you moved between the property and the retirement village as you were unhappy at the retirement village yet were struggling to live independently. On xx xx 20xx you were admitted to hospital with serious medical conditions. You remained in hospital until xx xx 20xx when you were discharged to residential care on a permanent basis. The property was left vacant. In xx 20xx your lease arrangement with the retirement village was surrendered and refunded. In xx 20xx you moved back to xx via medical escort and remain in residential care. In xx 20xx your child also relocated to xx. On xx xx 20xx you entered a contract of sale for the property, with settlement occurring on xx xx 20xx.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 subparagraph 118-130 | Income Tax Assessment Act 1997 section 118-145