Private ruling: Capital gains tax
Date of advice: 6 May 2016
Published: June 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Will you be exempt from paying capital gains tax on the disposal of your dwelling under the main residence exemption? | A1: No.

Relevant facts and circumstances: You purchased property. You did not move into the property. A natural disaster later made the property unliveable. The property has been closed to the public. You are currently repairing the property so that you can sell it. The property was never used to produce assessable income. It was your intention to live in the property with your child as your main residence.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 102-20 | Income Tax Assessment Act 1997 - Section 118-110

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or capital loss results from a CGT event occurring. The most common CGT event, A1, occurs when you dispose of a CGT asset to someone else. CGT event A1 will be triggered when you sell your property. Under section 118-110 of the ITAA 1997, you can generally disregard any capital gain or capital loss from a CGT event that happens to a dwelling that is your main residence for the entire period you owned it when: • the dwelling was your home for the whole period you owned it; • the dwelling was not used to produce assessable income; and • any land on which the dwelling is situated is not more than two hectares. A dwelling is considered to be your main residence from the time you acquired your ownership interest in it if you moved into it as soon as practicable after that time. A mere intention to occupy a dwelling as your main residence - without actually doing so - is not sufficient to obtain the exemption. In your case you purchased property which you have never lived in. We accept that a natural disaster later made your property unliveable for a significant period of time. However, because it had not yet been established as your main residence, you are unable to claim a main residence exemption for the property.