Private ruling: CGT - main residence exemption
Date of advice: 23 February 2026
Published: 7 April 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Are you entitled to the main residence exemption under Subdivision 118-B of the Income Tax Assessment Act 1997 (ITAA 1997) for the dwelling and up to 2 hectares of adjacent land the property, for the period during which Person A, occupied the dwelling? | A1: No.

Relevant facts and circumstances: Person A solely purchased the dwelling located on the property. The property is greater than 2 hectares. Person A treated the property as their main residence. You are Person A's children. Between DD MM YYYY and DD MM YYYY, you and Person A executed a Deed of Family Arrangement (the Deed). Under recital C of the Deed, ownership of the property was transferred to you as tenants in common in equal shares. The Deed stated, Person A retained the right to occupy the property and curtilage for the duration of their life on the property on the following conditions: • No rent or occupation fee would be payable; • Person A would pay for power, telephone, internet and mobile services, a motor vehicle and fuel as long as they can from their own funds and thereafter by you; • Person A would repair and maintain the homestead, fixtures and fittings and the property as long as they can from their own funds and thereafter by you; • Person A will keep the property insured as long as they can from their own funds and thereafter by you; • You would pay Council rates and charges and Local Land Services charges; • The right to reside will create an interest in the land which is a caveatable interest for Person A. On DD MM YYYY, the property was transferred to you as tenants in common in equal shares. Person A did not lodge a caveat on the property. Following the execution of the Deed, Person A continued to reside in the property until they passed on DD MM YYYY. You have not lived in the property and treated it as your main residence. On DD MM YYYY, you signed a contract of sale for the property. On DD MM YYYY, the property settled. On DD MM YYYY, you received a retrospective market valuation reported to determine the valuation of the property on the day it was transferred to you.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 Subdivision 118-B | Income Tax Assessment Act 1997 section 118-110

Reasons for decision: Detailed Reasoning - Capital gains tax: All legislative references are to the Income Tax Assessment Act 1997 , unless otherwise indicated. Section 102-20 provides that a capital gain or capital loss results from a capital gains tax (CGT) event occurring. You may make a capital gain as a result of a CGT event happening to an asset in which you have an ownership interest. Section 104-10 provides that CGT event A1 happens if you dispose of a CGT asset. You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. Subsection 104-10(3) provides that you dispose of a CGT asset when you either enter into a contract for its disposal, or where no contract exists, when the change of ownership occurs. In your circumstances, the property was sold, and you had a capital gain. | Detailed Reasoning - Legal v beneficial ownership: An entity's legal ownership of real property is the ownership interest which is stated on the property's legal title in accordance with the property law legislation in the State or Territory in which the property is situated. A beneficial owner is defined as a person or entity who is beneficially entitled to the asset. An individual can hold a legal ownership interest but have no beneficial ownership interest in an asset. Where the beneficial ownership and legal ownership of an asset are not the same, there must be evidence that the legal owner holds the property on trust for the beneficial owner. Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners contains guidance on the issues involved where the equitable interest in a property may not follow the legal title. Paragraph 41 of TR 93/32 provides the Commissioner considers that there are extremely limited circumstances where the legal and equitable interests are not the same and that there must be sufficient evidence to establish that the equitable interest is different from the legal title. Taxation Ruling TR 2006/14 Income tax: capital gains tax: consequences of creating life and remainder interests in property and of later events affecting those interests provides the Commissioner's view on the CGT consequences of creating life and remainder interests in property and the consequences dealing with those interests. TR 2006/14 distinguishes between life and remainder interests in the property held on trust (equitable interests) and life and remainder interests in land that is not held on trust (legal interests). Paragraph 9 of TR 2006/14 considers in respect of both equitable and legal interests, the consequences for each affected party arising from: • the creation of the interests; • a disclaimer of an interest; • the death of the person by whose life the life interest is measured; and • other events affecting the interests. Paragraph 105 of TR 2006/14 discusses a mere right to occupancy and states: 105. A right to reside in property for life (or a term of years) is not equivalent to a legal or equitable life interest. The right is a mere personal right which cannot be assigned. CGT event D1 in section 104-35 happens when such a right is granted. These arrangements should be contrasted with mere informal family arrangements where relatives may reside at each other's dwellings for a period but where there is no intention to create legal relations. In these circumstances CGT event D1 will not happen. Paragraphs 192 to 193 of TR 2006/14 state: 192. The Commissioner considers that legal life and remainder interests are not comparable to easements, profits a prendre or licences. Legal life and remainder interests are carved out of the existing fee simple and not superimposed on it in the way that rights attaching to these other interests are. Together legal life and remainder interests represent the entire freehold interest in the land. By 'creating' a life interest, the original owner is actually disposing of part of the freehold interest in the land in a similar way to the disposal of a percentage interest in the property. 193. Therefore, the creation of legal life and remainder interests involves disposals of the original asset by the original owner if created inter vivos or disposals by the legal personal representative or trustee of a deceased estate if the interests were bequeathed under the deceased's will. Paragraphs 194 to 196 of TR 2006/14 discussed a grant of lifetime right to reside in property 194. A life interest is different from a mere personal right to occupy a property for life. A right of occupancy does not carry with it a right to any income from the property. The distinction is important because different CGT consequences arise depending on whether a life interest or right to occupy is created. 195. Whether a life estate or right to occupy is created depends on all the facts and circumstances of a particular case. Generally, if a taxpayer is granted a right to 'use and occupy' a property (that is, they have the rights to rents and profits) this indicates that a life estate is created. However if a taxpayer is merely permitted to reside in a particular property then this would more likely be treated as the grant of a right to occupy the property. 196. A lifetime right to reside in a property can be granted in a family situation where for example, a parent sells their main residence and pays a lump sum to a child for the right to reside in the child's dwelling and to have the child provide domestic assistance such as washing, cooking and cleaning. This is more than a mere family or social arrangement. The arrangement is usually formal and documented in writing to provide evidence of the creation of the right to reside which may be needed if the family's circumstances change. Accordingly, CGT event D1 happens when these rights are created. Whether an arrangement creates these rights will depend on the particular facts and circumstances of the case and the intention of the parties. | Detailed Reasoning - Main Residence: Section 118-110 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. | Detailed Reasoning - Application to your circumstances: In your circumstances, Person A had a right to occupy the property, which is a personal right, not a proprietary or beneficial ownership interest. You also did not treat the property as your main residence. You are not eligible for the main residence exemption under subdivision 118-B.