Private ruling: Capital Gains Tax - Main residence - absence choice
Published: December 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the capital gain made on the sale of house 'B' disregarded? | A1: No. | Q2: Have you made a capital loss on house 'A'? | A2: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 110-25 | Income Tax Assessment Act 1997 Section 115-100 | Income Tax Assessment Act 1997 Section 116-20 | Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-135 | Income Tax Assessment Act 1997 Section 118-145 | Income Tax Assessment Act 1997 Section 118-185

Reasons for decision: Summary: CGT is the tax that you pay on any capital gain you include on your annual income tax return. CGT events are the different types of transactions or events that may result in a capital gain or capital loss. Many CGT events involve a CGT asset. The timing of a CGT event is important because it determines in which income year you include your capital or capital loss. The most common capital gains tax event (CGT event A1) happens if an individual disposes of a CGT asset to another entity. The time of the event is when the contract for the disposal is entered into, or if there is no contract, when the change of ownership occurs. | Detailed Reasoning - Main residence exemption: Generally, you disregard a capital gain or capital loss made on the disposal of a property that is your main residence if: · the property was your home for the whole period you owned it · the property was not used to produce assessable income while you were living there, and · any land on which the dwelling is situated is not more than two hectares. A dwelling can only be your main residence for the whole period you owned it if it became your main residence as soon as practicable after purchase. If you could not move in because the house was rented out, you are not considered to have moved in to the house as soon as practicable after you acquired the house. Therefore, as you did not move in the house as soon as practicable after settlement, no exemption will apply for the number of days prior to the house becoming your main residence. | Detailed Reasoning - Partial main residence exemption: If a property is not your main residence for your entire ownership period, you are entitled to a partial main residence exemption. You calculate your capital gain or capital loss using the following formula: Capital gain or capital loss x Non-main residence days Total number of days in ownership period The total number of days in your ownership period will be the period from the date you acquired the house until the date the house was disposed. Your non-main residence days will be the days that the house was not your main residence. Where these conditions are met as in your situation, the capital gain is reduced by 50% (section 115-100 of the ITAA 1997). In relation to property 'A', you will not be able to claim a capital loss as a CGT event has not occurred, as you have not disposed of the property. Note 1: If you had made an absence choice in respect of Property A, you would have had no main residence days in respect of property B as the making of that choice means that no other property can be treated as a main residence while that choice applies.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You purchased house 'A' with settlement occurring after 20 September 1985 and moved into the property as soon as practicable. | You resided in the house for a period of time. After this the house was used for family holidays. | You obtained a valuation, which valued the property at an amount. | After a number of years, you obtained another valuation, which valued the property at a lesser amount. | The house was rented for a number of years. | The house became your main residence after a number of years, until you sold the house. | You have supplied figures that form part of this private ruling. | You recently purchased another house and moved into the property. | You will not make an absence choice in relation to house 'A'. | You have a carried forward loss.