Private ruling: Capital gains tax – main residence exemption – absence choice
Published: December 2017
Ruling period: Year ended 30 June 2017.
Date scheme commenced: 1 July 2016.

Ruling: Q1: Will you be entitled to claim a full main residence exemption under section 118-110 of the Income Tax Assessment Act 1997 ? | A1: Yes.

Relevant facts and circumstances: After 20 September 1985 you and your partner (you) jointly purchased a 50% share in the Dwelling with each having a 25% ownership interest. The other 50% ownership interest in the Dwelling was purchased at the same time by your child and relative. You and your child and relative moved into the dwelling as soon as practicable after purchase and occupied the dwelling as your main residence. A couple of years later you purchased another property (property X) and moved into that property. Your child and relative continued to occupy the Dwelling and the dwelling was not rented. Approximately 16 years later you sold your 50% share in the Dwelling to your child and relative. You have made the absence choice in relation to the Dwelling for the whole ownership period. You have not made the choice to treat property X as your main residence since you purchased it.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-100 | Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 subsection 118-145 Detailed reasoning | Section 118-100 of the Income Tax Assessment Act 1997 (ITAA 1997) allows you to ignore a capital gain or capital loss you make from a capital gains tax (CGT) event that happens to a dwelling that is your main residence. | Under subsection 118-110(1) of the ITAA 1997; you are eligible for the exemption if: | (a) you are an individual; and | (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 you did not acquire it as a trustee of, the estate of a deceased person. | Section 118-145 of the ITAA 1997 also allows you to treat a dwelling (that was your main residence) as your main residence indefinitely, if you do not use it for the purpose of producing assessable income. | For any period(s) you choose to apply the main residence exemption, you cannot treat any other dwelling as your main residence for that period of time. | In your case you purchased a 50% share in the Dwelling with your child and relative and used it as your main residence. You moved out of the Dwelling and made the absence choice to continue to treat it as your main residence. As the Dwelling was occupied by your child and relative you did not receive any rental income for their occupation of the dwelling. | As the Dwelling was your main residence and you have not received any assessable income from the Dwelling you are able to treat the Dwelling as your main residence for an indefinite period of time. | The Commissioner is satisfied that you have met the requirements under section 118-110 and 118-145 of the ITAA 1997 and will allow you to claim a full main residence exemption on the sale of your interest in the Dwelling.