Private ruling: Capital gains tax - main residence
Ruling period: Year ended 30 June 2011.
Date scheme commenced: 1 July 2005.

Ruling: Q1: Did you move into your dwelling as soon as practicable after it was completed? | A1: No. | Q2: Will you be fully exempt from capital gains tax on the sale of your dwelling? | A2: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-135 | Income Tax Assessment Act 1997 Section 118-185

Reasons for decision: Detailed Reasoning - Main residence:: As a general rule, you can disregard any capital gain or capital loss realised on the disposal of a dwelling that was your main residence. Generally, to get the full exemption from capital gains tax (CGT) the following conditions must be met: · you are an individual; · you moved into the dwelling as soon as practicable; · the dwelling must not have been used to produce assessable income; and · the dwelling was your main residence throughout your ownership period. Moving into the dwelling as soon as practicable: Section 118-135 of the Income Tax Assessment Act 1997 (ITAA 1997) extends the main residence exemption to take into account the time needed to move into a dwelling. The section allows you to treat a dwelling as your main residence for the period from when you acquired it until it was first practicable to move into it. The term 'as soon as practicable' in section 118-135 of the ITAA 1997 is used to provide some leeway from what would otherwise be a strict requirement that the full exemption would only be available if the dwelling became your main residence on the date you acquired it; that is, you would have to physically move in on the day of settlement. The Explanatory Memorandum to the Bill which became the Tax Law Improvement Act (No.1) 1998, indicates that section 118-135 of the ITAA 1997 is intended to apply in situations where moving into the dwelling is temporarily delayed due to matters outside the persons control. The provision takes into account situations where, for example, there is a delay in moving in because of illness or other reasonable cause. The examples provided in Taxation Determination TD 92/147 illustrate the type of situations envisaged. The factors against concluding that you moved into the dwelling as soon as practicable include: · the length of time between the date the dwelling was completed and the date you first occupy it; and · what the dwelling is used for during that period (earning rental income). In this case, while there were unforseen circumstances relating to your family's health problems, the dwelling was rented out during your time overseas and there was a significant time delay from when the dwelling was completed and when you moved in. As a result, you have not moved into the dwelling as soon as practicable and will not be fully exempt from CGT. Please note: You may be entitled to a partial exemption from CGT for the time you commenced living in the dwelling until it was sold.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: You purchased a vacant lot in 200X to build a dwelling on. | You intended to move into the dwelling immediately after it was completed. | The dwelling was completed in 200X. | After arranging for the dwelling to be built, you were informed of health problems with your family. | You were living in rental accommodation while the dwelling was being built. | During the time the dwelling was under construction, you travelled overseas due to your family's health problems. | During your time overseas, the dwelling was completed and rented out. | The dwelling was rented from 200Y until 200Z. | You returned to Australia when your family member's health stabilised in 2009. | You moved into the dwelling in 200Z. | You sold the dwelling the following year.