Private ruling: Main Residence Exemption from Capital Gains Tax
Date of advice: 10 December 2015
Published: February 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a full main residence exemption on the sale of property A? | A1: Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-145

Reasons for decision: Detailed Reasoning - Capital Gains tax: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer makes a capital gain or loss as a result of a capital gains tax (CGT) event happening to a CGT asset. CGT assets include real estate acquired on or after 20 September 1985. | Detailed Reasoning - CGT - main residence: Section 118-110 of the ITAA 1997 provides that you can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling that is your main residence. To qualify for full exemption, the dwelling must have been your main residence for the whole period you owned it, (the ownership period) and must not have been used to produce assessable income. Subject to the absence rule, a taxpayer will get a partial exemption for a CGT event that happens in relation to their ownership interest in a property if the dwelling was their main residence for only part of their ownership period. Subsection 118-145(1) of the ITAA 1997 allows a taxpayer to make a choice that a dwelling continues to be treated as their main residence even though it has ceased to be. Where the dwelling was not used for income producing purposes there is no time limit to when the choice is made. If a taxpayer makes this choice, they cannot treat any other dwelling as their main residence for that period. In your case, property A became your residence when you purchased it. You did not use the property for income producing activities. You have sold the property. You also own another property that you also lived in at different times. You have elected for property A to be your main residence. Accordingly you are entitled to the full main residence exemption on the sale of property A as you elected this property to be your main residence and it had not been used to produce income. Consequently you are not subject to capital gains tax on the sale of property A. You should note that you cannot claim the main residence exemption for your other property for anytime during the period you have claimed the exemption for property A.

Relevant facts: You purchased property A which became your residence from the time of purchase. It has not been used to produce income. | You also own another property (property B) and you have at different times resided at both properties. In recent years you have mainly resided at property A. | You have sold property A. | You have nominated property A as your principal place of residence.