Private ruling: Capital gains tax
Published: February 2015
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Will two properties that have been renovated into one residence be exempt from capital gains tax under the main residence exemption? | A1: Yes.

Relevant facts and circumstances: You have lived in a small one bedroom unit. You purchased the flat next door and converted both units into a 2 bedroom flat. You have lived in the units as a single residence. You are about to retire and will sell the units.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-115

Reasons for decision: Summary: Generally, you ignore a capital gain or capital loss from a CGT event that happens to your ownership interest in a dwelling that is your main residence. To get the full exemption from CGT: • the dwelling must have been your home for the whole period you owned it • you must not have used the dwelling to produce assessable income, and • any land on which the dwelling is situated must be two hectares or less. Taxation Determination TD 1999/69 considers whether the term dwelling, as defined in section 118-115 of the Income Tax Assessment Act 1997 (ITAA 1997), can include more than one unit of accommodation. TD 1999/69 states that if the units of accommodation are used together as one place of residence or abode they can be considered a dwelling. In this case, you utilise both units as a single residence. As per TD 1999/69 we consider both units to be a dwelling as defined in section 118-115 of the ITAA 1997. Therefore you are entitled to apply the main residence exemption to the units.