Private ruling: Capital Gains Tax- main residence exemption
Date of advice: 17 August 2017
Published: November 2017
Ruling period: Year ended 30 June 2004 to 30 June 2016
Date scheme commenced: August 2003

Ruling: Q1: Can you treat your property as your main residence from 2003 to 2016 for the purposes of the main residence exemption? | A1: Yes

Relevant facts and circumstances: You purchased a property (the property) in August 2003. The property was purchased as your main residence. You moved in as soon as practicable after settlement. You lived in the property up until mid-late 2005. In mid-late 2005 you had to relocate for work. You decided to rent the property while you were living away. In mid-late 2010 you moved back into the property whilst you were on annual leave from your job and you lived there for approximately 18 months. During this time you changed all utilities back into your name and moved basic furniture into the property to use while living there. In early-mid 2011 you moved away again for your job. The property was again rented out for approximately four years. In mid-late 2015 you moved back into the property when you were on annual leave from work. Once again all of the utilities were changed back into your name and furniture was moved in. In early 2016 you went back to your job. The property was available to rent again from mid 2016. You have since returned to the city your property is located in permanently, however you have not moved back in to your property since you returned due to health reasons. Whilst you were living away you rented a house to live in, you did not own any other properties.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10, | Income Tax Assessment Act 1997 Section 118-110, | Income Tax Assessment Act 1997 Section 118-145, | Income Tax Assessment Act 1997 Section 118-145(1), | Income Tax Assessment Act 1997 Section 118-150 and | Income Tax Assessment Act 1997 Section 118-185.

Reasons for decision: Summary: The disposal of your residence will trigger a CGT event A1 (section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997)). Generally, under section 118-110 of the ITAA 1997, you can ignore a capital gain or capital loss from a CGT event that happens to a dwelling that is your main residence for the entire period you owned it. However, if the dwelling is not your main residence for your entire ownership period, you will only be entitled to a partial exemption from capital gains tax under section 118-185 of the ITAA 1997. However, subsection 118-145(1) of the ITAA 1997 allows you to choose to treat a dwelling as your main residence even though you no longer live in it. You cannot make this choice for a period before a dwelling first becomes your main residence. This choice needs to be made only for the income year that a CGT event happens to the dwelling that is, the year that you enter into a contract to sell it. If you make this choice, you cannot treat any other dwelling as your main residence for that period (except for a limited time if you are changing residences). If you use the dwelling to produce income you can choose to treat it as your main residence for up to six years after you cease living in it. If you are absent more than once during the period you own the home, the six-year maximum period that you can treat it as your main residence while you use it to produce income applies separately for each period of absence. In your case it is accepted that you are entitled under subsection 118-145(1) of the ITAA 1997, to treat the residence as your main residence during the period you were renting it out for the following reasons: ● the property was first occupied as your main residence before it was let out, and ● the rental period did not exceed six years. As you have chosen to treat the property as your main residence, the property was occupied before being let out and the rental period did not exceed six years the dwelling would be considered to be your main residence from 2003 to 2016. Therefore you can disregard the capital gain from the sale of the dwelling for this period.