Private ruling: CGT - main residence exemption - joint tenants
Date of advice: 5 May 2022
Published: July 2022
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will you have a capital gain or loss on disposal of your ownership interest in Property B? | A1: Yes. | Q2: Are you eligible for a full main residence exemption on the disposal of your ownership interest in Property A ? | A2: Yes.

Relevant facts and circumstances: You purchased a property (Property A) with your adult child. You purchased the property as joint tenants. You have resided in Property A since purchase and intend to sell the property in the near future. The purchase of Property A was financed with a bank loan and any difference was contributed equally by you and your adult child. You also purchased a property (Property B) with your adult child. You purchased this property as joint tenants. Your adult child has resided in Property B since they purchased it and intends to sell the property in the near future. The purchase of Property A was financed with a bank loan and any difference was contributed equally by you and your adult child.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 108-5(1) | Income Tax Assessment Act 1997 section 108-7 | Income Tax Assessment Act 1997 subsection 118-110(1)

Reasons for decision: Summary: Yes. As you jointly own Property B with your adult child, and have never resided at the property, you will be liable for 50% of any capital gain or loss incurred on disposal of Property B. | Detailed Reasoning - Detailed reasoning: For capital gains tax (CGT) purposes, individuals who own a CGT asset as joint tenants are treated as if each of them held that interest as tenants in common owning equal interests in the asset. Any capital gain or loss is shared in accordance with their ownership interests. CGT event A1 happens when you dispose of a CGT asset. On disposal of Property B, you will dispose of a CGT asset, being a 50% interest in the property. Therefore, you will be liable for any capital gain or loss incurred on disposal of Property B. | Detailed Reasoning - Question 2: Are you eligible for a full main residence exemption on the disposal of your 50% ownership interest in Property A? | Summary: Yes. You have met the requirements for a full main residence exemption on the disposal of your ownership interest in Property A. | Detailed Reasoning - Detailed reasoning: 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 capital gains tax (CGT) event that happens to a dwelling that is your main residence. As you have resided in Property A from the time your ownership interest commenced, you are eligible for a full main residence exemption on disposal of your 50% interest in Property A.

Question 1: Will you have a capital gain or loss on disposal of your 50% ownership interest in Property B?