Private ruling: Capital gains tax - main residence exemption - as soon as practicable
Published: July 2011
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Question and Answer | Will you be considered to have moved into the Australian dwelling as soon as practicable? | No.

Relevant facts and circumstances: You and your spouse have been residing and working overseas for a number of years. You and your spouse are currently residing overseas where you have an employment contract. While overseas, you purchased a dwelling in Australia. You purchased the Australian dwelling with the intention of moving into it upon your return to Australia. You expected to return permanently to Australia after your employment contract had terminated. Your employment contract has now been extended. The extension of your employment contract was unexpected when you decided to purchase the Australian dwelling. You currently have no plans to rent the dwelling out.

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

Reasons for decision: Summary: Generally you disregard a capital gain or capital loss made on the disposal of a dwelling that is your main residence if: · the dwelling was your main residence 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. 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, provided that you do so as soon as practicable This is to account for situations where, for example, there is a delay in moving into a dwelling due to illness or other reasonable cause that is beyond your control. The term 'as soon as practicable' is intended to apply in situations where moving into the dwelling is temporarily delayed due to matters outside your control and during the delay you do not take up residence elsewhere for a substantial period. In your situation, you purchased the dwelling while you were living overseas. You were aware of the fact that you would not be returning to Australia for several months at the time that you purchased the dwelling and that you would not be able to move into for a considerable amount of time. Your employment contract was subsequently extended, which resulted in a further delay. The delay in your moving into the dwelling was not due to factors that were outside your control. Therefore, you will not be entitled to extend the main residence exemption for the period before you moved in. Accordingly, you are not entitled to the full main residence exemption. Section 118-185 of the ITAA 1997 provides that where a dwelling was your main residence for only part of your ownership period, you will only be entitled to a partial main residence exemption. Your capital gain or capital loss is calculated using the following formula: Total capital gain or capital loss x Non main residence days Total days in your ownership period The non main residence days are the number of days in your ownership period when the dwelling was not your main residence. The total days in your ownership period are the number of days from the date of settlement of the purchase of the dwelling until the date of settlement of the sale of the dwelling. In your situation, the period from the settlement of the dwelling at purchase until you move into the dwelling will be considered to be non main residence days.

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