Private ruling: CGT cost base - cost of owning dwelling - partial main residence exemption
Date of advice: 6 April 2021
Published: June 2021
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: For the purposes of calculating CGT, where you are not claiming the main residence exemption for a dwelling for your entire ownership period, and where the dwelling was never used to produce income, can you include the costs of owning the dwelling for the entire ownership period in the third element of your cost base? | A1: Yes. Although you are applying the main residence exemption to part of your ownership period of dwelling A, there is no legislative provision that excludes or requires you to apportion the costs of owning the dwelling relevant to the third element of your cost base under subsection 110-25(4) of the Income Tax Assessment Act 1997 (ITAA 1997). Therefore, the cost of ownership expenses for your entire ownership period that were not deductible can be included in your cost base. Your capital gain is then calculated in accordance with the formula set out in section 118-185 of the ITAA 1997.

Relevant facts and circumstances: You acquired dwelling 'A' in 20XX. You lived in dwelling A for your entire ownership period until you sold it in 20XX. Dwelling A was never used to produce income. You sold another dwelling, dwelling 'B', during your ownership of dwelling A. You had lived in dwelling B before moving into dwelling A. You applied the absence rule and the main residence exemption to dwelling B. Because you applied the absence rule and main residence exemption to dwelling B, you have a period where the main residence exemption cannot be claimed on dwelling A.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 110-25(4) | Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 section 118-185