Private ruling: Capital gains tax
Date of advice: 27 May 2026
Published: 10 August 2026
Ruling period: Year ended DDMMYYYY | Year ended DDMMYYYY | Year ended DDMMYYYY | Year ended DDMMYYYY
Date scheme commenced: DDMMYYYY

Ruling: Q1: Are we exempt from Capital Gains Tax on a property that was not our main residence for a period due to COVID-19 government restrictions under Income Tax Assessment Act 1997 (ITAA 1997)section 104-10? | A1: No. Based on the facts of the application both joint owners of the property are not entitled to claim full exemption from capital gains tax on the property at XXX as it was not occupied as soon as practicable and it was used to produce assessable income.

Relevant facts and circumstances: You purchased a property at XXX on DDMMYYYY with a settlement date of DDMMYYYY. The property was jointly owned between XX XX and XX XX (Owners). Agreement between Owners and tenant that the tenant would continue to rent until MM 20YY. You signed a new Standard Form Residential Tenancy Agreement with the same tenant for a period of XX weeks commencing DDMMYYYY until DDMMYYYY. The property was tenanted at time of settlement until DDMMYYYY. You advised that the client did not report that they were financially impacted by COVID-19 and statements provided by your real estate agent for the YYYY and YYYY end of year show no reduction in rent being paid. Email dated DDMMYYYY from your real estate agent advising the notice would be served on DDMMYYYY. The tenant left the property on DDMMYYYY, and you commenced residing on DDMMYYYY. The property was sold with a Contract Sale date of DDMMYYYY and a Settlement date of DDMMYYYY.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 118-110(2)

Reasons for decision: Detailed Reasoning - Capital gains tax: A capital gain or capital loss is made when a capital gains tax (CGT) event happens to a CGT asset you own. The most common event is CGT Event A1 which happens when a person/s disposes of a CGT asset to someone else. A capital gain is made if the amount received (called capital proceeds) from the disposal exceeds the cost base (the cost of the asset and certain other costs associated with acquiring, holding and disposing of the asset) of the CGT asset. Your net capital gain is the total of your capital gains for the income year, reduced by any capital losses that you have made. You need to report capital gains and losses in your income tax return and pay tax on your capital gain. | Detailed Reasoning - CGT full main residence exemption: A capital gain or loss is disregarded when one of the CGT events in subsection 118-110(2) of the ITAA 1997 happens to a CGT asset that is a dwelling or an ownership interest in it if: a) you are an individual b) the dwelling was your main residence throughout your ownership period, and c) the interest did not pass to you as a beneficiary in, and was not acquired as a trustee of, the estate of a deceased person. A full exemption from CGT applies if the dwelling was your home for the whole period that you owned it, and the dwelling was not used to produce assessable income. 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. | Detailed Reasoning - Moving in as soon as practicable: 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. If you purchased the dwelling, this would generally be the date of settlement of the purchase contract. However, if there is a delay in moving in because of illness, or other unforeseen circumstances and you move into the dwelling as soon as the cause of the delay is removed - for example you recover from the illness - the exemption may still be available from the time you acquired your ownership interest in the dwelling. If you could not move in because the dwelling was being rented to someone, you are not considered to have moved in as soon as practicable after you acquired your ownership interest. | Detailed Reasoning - Partial main residence exemption: Partial exemptions apply where the dwelling was the main residence for only part of the ownership period, or the dwelling was used to produce assessable income. If a dwelling was your main residence for only part of your ownership period, you will only get a partial exemption for a CGT event that occurs in relation to the dwelling. The capital gain or loss is calculated using the following formula: Total capital gain or loss × Non-main residence days Total days in your ownership period Where: • non-main residence days is the number of days in your ownership period when the dwelling was not your main residence, and • the ownership period for capital gain tax purposes is from the date of settlement of the contract to purchase the property until the date of settlement of the contract of sale of the property. Our publication Guide to Capital Gains Tax which can be sourced on our ATO website ato.gov.au and search QC 104764 provides the following examples to explain the application of partial exemption and moving in as soon as practicable: | Detailed Reasoning - Example 64: partial exemption: The facts are the same as in Example 63 except that Frank rented out the house from 26 October 2022, the date of the settlement of the purchase contract, until 2 March 2004. Frank makes a capital gain of $90,000 on the house. To work out the part of the capital gain that isn't exempt, Frank must determine how many days in his ownership period the dwelling was not his main residence. Frank had ownership interest in the property from settlement of the purchase contract (26 October 2002) until settlement of the sale contract (20 July 2025), a total of 8,304 days. The period between the dates the purchase contract was signed (14 August 2001) and settlement (25 October 2002) is ignored. As the house was not Frank's main residence from 26 October 2002 to 2 March 2004 (494 days), he does not get the exemption for this period. Frank calculates his capital gains as follows: • $90,000 capital gain x (494 days / 8,304 days) = $5,354 taxable portion As Frank entered into the purchase contract after 11.45am AEST on 21 September 1999 and entered into the sale contract after owning the house for at least 12 months, he can reduce his capital gain by the CGT discount of 50% after applying any capital losses. Because Frank signed the sale contract on 25 March 2025, the CGT event occurred in the 2024-25 income year, even though the settlement occurred in the next income year. Frank writes the capital gain on his 2025 tax return. | Detailed Reasoning - Example 65: moving in as soon as practicable: Mary signs a contract to buy a townhouse on 1 March 2025. She is to take possession when settlement occurs on 30 April 2025. On 11 March 2025, Mary is directed by her employer to go overseas on an assignment for 4 months, leaving on 25 March 2025. Mary moves into the townhouse on her return to Australia in late July 2025. Mary's overseas assignment was unforeseen at the time she bought the property. As she moved in as soon as practicable after settlement of the contract occurring, Mary can treat the townhouse as her main residence from the date of settlement until she moved in. The Residential Tenancies Amendment (COVID-19) Regulation 2020 commencement date 15 April 2020 The COVID-19 emergency refers to the declared public health emergency under section 319(2) of the Public Health Act 2005 , initially declared on 29 January 2020 and subsequently extended under that Act. The object of the Residential Tenancies Amendment (COVID-19) Regulation 2020 was to: (a) generally prohibit, in the 6 months after the commencement of the regulation (the moratorium period ), a landlord (under a residential tenancy agreement other than a social housing tenancy agreement) from: (i) giving a tenant who is a member of a household financially impacted by the COVID-19 pandemic (an impacted tenant ) a termination notice under the Residential Tenancies Act 2010 for non-payment of rent or charges, or (ii) applying to the NSW Civil and Administrative Tribunal (NCAT) under the Residential Tenancies Act 2010 for a termination order relating to a termination notice given to an impacted tenant for non-payment of rent or charges, or (iii) otherwise applying to NCAT for a termination order in relation to the residential tenancy agreement solely on the ground that an impacted tenant has failed to pay rent or charges, and (b) provided that, during the moratorium period, a landlord (under a residential tenancy agreement other that a social housing tenancy agreement) may only evict an impacted tenant for non-payment of rent or charges if - (i) the landlord gives a termination notice, or applies for a termination order, at least 60 days after the commencement of the regulation, and (ii) the landlord and impacted tenant have participated in good faith, in a formal rent negotiation process about the rent or charges payable, and (iii) it is fair and reasonable in the circumstances of the case for the landlord to give the termination notice or apply for the order, and (c) require a landlord (under a residential agreement other than a social housing tenancy agreement) to give at least 90 days notice of the termination of: (i) a fixed term tenancy at the end of the term, or (ii) a periodic tenancy, or (iii) a tenancy because of a breach of the residential tenancy agreement (other than non-payment of rent or charges), or (iv) a tenancy of 20 year or more, and (d) prohibit a landlord (under a residential tenancy agreement other than a social housing tenancy agreement) from listing an impacted tenant on residential database for the non-payment of rent or charges, and (e) prescribe, during the moratorium period, the minimum period of written notice the proprietor of a boarding house must give a resident financially impacted by the COVID-19 pandemic (an impacted resident) of an eviction based solely on the non-payment of fees (including occupancy fees or rent) or fees for services as follows: (i) if the proprietor and impacted resident have participated in negotiations about the fees but were not able to reach agreement because the impacted resident did not participate in good faith - 60 days, or (ii) otherwise - 6 months, or (f) prescribe, during the moratorium period, that the proprietor of a boarding house must give a resident 90 days written notice of eviction, unless the eviction is based on: (i) the resident causing or permitting serious damage to the premises or other resident's property, or (ii) the resident using the premises for illegal purposes, or (iii) the resident threatening, abusing, intimidating or harassing other residents, or (iv) the non-payment of fees (including occupancy fees or rent) of fees for services, unless the resident is an impacted resident. | Detailed Reasoning - Residential Tenancies Amendment (COVID-19) (No 2) Regulation 2020: The Regulation commenced on 16 October 2020 with a relevant period term of 26 March 2021. The object of the Residential Tenancies Amendment (COVID-19) (No 2) Regulation 2020 was to: | Detailed Reasoning - Prohibition on landlords terminating agreements or recovering possession during relevant period: (1) For the purpose of section 229(1) of the Act, a landlord is prohibited from doing any of the following during the relevant period: (a) giving an impacted tenant a termination notice under section 87 of the Act on the ground specified in section 88 of the Act, (b) applying to the Tribunal for a termination order under section 83(2) of the Act relating to a termination notice given under section 87 of the Act, on the ground specified in section 88 of the Act, to an impacted tenant, (c) otherwise applying to the Tribunal for a termination order in relation to a residential tenancy agreement on the group specified in section 88 of the Act if the tenant under the agreement is an impacted tenant. (2) However, a landlord may give a termination notice or apply for a termination order that the landlord is otherwise prohibited from giving or applying for under subclause(1) if: (a) the landlord has participated, in good faith, in a formal rent negotiation process with the impacted tenant, and (b) it is fair and reasonable in the circumstances for the landlord to give the termination notice or apply for the order (3) For the purpose of section 111(2) of the Act, a termination notice that is not given in accordance with this clause is taken not to have been given in accordance with Part 5 of the Act. (4) In dealing with an application by a landlord or an impacted tenant relating to a termination notice or a termination order, the Tribunal may, for the purposes of satisfying itself of the matters specified in subclause (2), have regard to the following: (a) any advice provided by NSW Fair Trading relating to the participation of the landlord or impacted tenant in the formal rental negotiation process, including whether the landlord or impacted tenant refused, or refused to make, a reasonable offer about rent, (b) whether the impacted tenant has continued to make any payments towards the rent, (c) the nature of any financial hardship experienced by the landlord or impacted tenant, including the general financial position of each party, (d) the availability and affordability of reasonable alternative accommodation for the impacted tenant, (e) any special vulnerability of the impacted tenant, (f) the public health objectives of: (i) ensuring citizens remain in their homes, and (ii) preventing all avoidable movements of persons (5) Subclause (4) does not limit the matter of the Tribunal may have regard to. | Detailed Reasoning - Residential Tenancies Amendment (COVID-19 Pandemic Emergency Response) Amendment Regulation 2021: The Regulation commenced on 14 July 2021 with a relevant period term of 11 September 2021. The object of this Regulation was to exempt tenants who are financially impacted by the COVID-19 pandemic from the operation of provisions of the Residential Tenancies Act 2010 or the regulations made under that Act that would result in the termination of residential tenancy agreements or the recovery of possession of premises on the grounds of non-payment of rent or charges if the tenants continue to pay at least 25% of the rent payable under the agreement. The exemption will end at the end of 11 September 2021. | Detailed Reasoning - Residential Tenancies Amendment (COVID-19 Pandemic Emergency Response) Amendment Regulation (2) 2021: The Regulation commenced on 10 September 2021 with a relevant period term of 12 November 2021. The object of the Regulation is to - (a) Extend provisions exempting tenants who are financially impacted by the COVID-19 pandemic from the operation of provisions of the Residential Tenancies Act 2010 ( the Act ) or the regulations made under the Act (the regulations) that would result in the termination of residential tenancy agreements or the recovery of possession of premises on the grounds of non-payment of rent or charges if the tenants continue to pay at least 25% of the rent payable under the agreement until 12 November 2021, and (b) From 12 November until 12 February 2022, exempt those tenants who accrued rental arrears from the operation of provisions of the Act or the regulations that would result in the termination of residential tenancy agreements or the recovery of possession of premises on the grounds of those arrears unless: (i) if the landlord and the tenant have an agreement for the repayment of the arrears - the tenant has failed to comply with the agreement on at least 2 occasions and it is otherwise fair and reasonable for the provisions to apply to the tenant, or (ii) if the landlord and the tenant do not have an agreement for the repayment of the arrears - the landlord and the tenant have participated in good fair in a formal arrears repayment negotiation process and it is otherwise and reasonable for the provisions to apply to the tenant. | Detailed Reasoning - Jointly owned dwellings: Where a dwelling is jointly owned, each owner must consider their own circumstances when applying the main residence exemption and ensure they meet the relevant conditions. | Detailed Reasoning - Application to your circumstances: As the property was your main residence for only part of your ownership period, you will only be entitled to a partial exemption for a CGT event that occurred in relation to the property. You made a personal decision to not move into the property as soon as practical for several reasons as follows: • agreement with the current tenants to remain in the property until the MMYYY to MMYYYY school holidays • COVID-19 restrictions in regard to movements • restrictions in the Residential Tenancies Amendment (COVID-19) Regulation 2020 where tenants could not be evicted if they had been financially impacted by COVID-19 The period from date of settlement DDMMYYYY until the date you moved into the property DDMMYYYY you are not entitled to an exemption from CGT for the following reasons: • you made a personal decision to not move as soon as practicable into the property after settlement due to the schooling year • the property was tenanted at the date of purchase, and the current Standard Form Residential Tenancy Agreement in place from previous owner was for the period DDMMYYYY to DDMMYYYY. • you confirmed in writing that the tenant did not file for financial hardship and therefore the Residential Tenancies Amendment (COVID-19) Regulation 2020 restricting termination or eviction of tenants does not apply in your circumstance • while movement was restricted during periods of lockdown in Sydney the Public Health (COVID-19 Restrictions on Gathering and Movement) Order 2020 [NSW] commencing DDMMYYYY on Schedule 1 - Reasonable excuses at No.8 states: o "moving to a new place of residence (including a business moving to a new premises) or between different places of residence of the person or inspecting a potential new place of residence" • the same tenant signed a new Standard Form Residential Tenancy Agreement for a period of XX weeks between DDMMYYYY to DDMMYYYY with no variance of the rent payable per week. • the tenant continued to reside and pay rent until you officially moved into the property on DDMMYYYY. Therefore, only a partial main residence exemption applies to the property for CGT purposes being from the date you commenced living in the property DDMMYYYY until date of settlement DDMMYYYY.