Private ruling: Capital gains tax
Date of advice: 12 May 2023
Published: 10 July 2023
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you able to calculate your CGT liability on your pre divorce ownership percentage? | A1: No. | Q2: Is your CGT liability based on your post-divorce ownership percentage? | A2: Yes. | Q3: Can you get a partial main residence exemption for the period you lived in the property as your main residence? | A3: Yes.

Relevant facts and circumstances: You and your ex-spouse purchased Property Z several years ago. This property was rented out from the date of purchase. Your ex-spouse owned the larger percentage, and you owned a smaller percentage. You and your ex-spouse separated a number of years ago. You and your ex-spouse divorced in the following year. As part of the divorce settlement, you received Property Z and your ex-spouse kept the family home. You had 100% ownership of Property Z from that time onwards. You moved into the property in the following month and treated it as your main residence until a few years ago. The property was rented from that time. The property was sold approximately a year later. You purchased another home to use as your main residence on the day Property Z settled.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-200

Reasons for decision: Summary: 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. 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. You had a 100% ownership interest in the property from when you received it as part of your divorce settlement. Any CGT is calculated on your ownership interest of 100% and not your pre divorce ownership percentage | 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 Property Z was not your main residence for the whole of your ownership period you cannot have a full main residence exemption on the property. | Detailed Reasoning - Partial main residence exemption: Where a full exemption is not available, you may be entitled to a partial exemption under section 118-200 of the ITAA 1997. You calculate your capital gain or capital loss as follows: > Non-main residence days - numbers of days in the period from the date of death You are entitled to a partial main residence exemption from the date when you moved into the property to the date when you no longer treated it as your main residence.