Private ruling: Capital gains tax main residence exemption
Published: November 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you entitled to the capital gains tax main residence exemption on the sale of the dwelling? | Yes.

Relevant facts and circumstances: You and your spouse purchased a dwelling and occupied it on the settlement date. You moved out of the dwelling approximately two months before it was sold. You made a capital gain on the sale of the dwelling. You did not have an ownership interest in any other dwelling during your period of ownership.

Relevant legislative provisions: Income Tax Assessment Act 1997 s ection 118-110 | Income Tax Assessment Act 1997 section 118-125 | Income Tax Assessment Act 1997 s ection 118-135 | Income Tax Assessment Act 1997 s ection 118-145 | Income Tax Assessment Act 1997 subsection 118-145(4)

Reasons for decision: Summary: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling or your ownership interest in it, if you use the dwelling as your main residence. To qualify for a full exemption, the dwelling must have been your main residence for the whole period you owned it. Should you move out of the dwelling prior to your ownership interest ending, you are allowed to treat the dwelling as your main residence indefinitely as long as you do not use it for income producing purposes. However, should you use the dwelling for income producing purposes, you are still allowed to treat it as your main residence for a maximum period of six years while you use it for that purpose (section 118-145 of the ITAA 1997). You can only choose to treat a dwelling as your main residence where no other dwelling is treated as your main residence during the period of absence (subsection 118-145(4) of the ITAA 1997). In your case, you purchased a dwelling and used it as your main residence and moved out of the dwelling approximately two months before it was sold. Therefore, you are entitled to the main residence exemption and can disregard the capital gain you made on the sale of the dwelling.