Private ruling: Capital gains tax - main residence - absence choice
Published: February 2014

Ruling: You purchased your unit more than five years ago. | Settlement occurred shortly after. | You moved in and established the unit as your main residence. | You continued to reside there for a period of less than 12 months when you rented out your unit. | You are currently residing with your parent as their carer. | You will move back into your unit later this year for a period of time before you will move out and return to live with your parent. | When you move back into your unit you will only take your belongings that you need to live in your unit. | You will keep the remainder of your belongings at your parent's home. | You will spend some nights at your parent's home during the week when they need your assistance. | When you move back into the unit you will end the lease with your tenant. Your tenant and the people living with them or their friends will continue to live in your unit rent free including all utility costs. | Your tenant is a good tenant and you would like to keep them in the long term and do not wish to find new tenants when you move out again. | You will get your tenant to sign a new lease when you move out of your unit. | You will continue the above or similar arrangement in the future.


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 118-125 | Income Tax Assessment Act 1997 Section 118-130 | Income Tax Assessment Act 1997 Section 118-145

Reasons for decision: Detailed Reasoning - Main residence: For the purposes of the main residence exemption, you have an ownership interest in a dwelling or land you acquire under a contract from the time you get legal ownership (unless you have a right to occupy it at an earlier time). You have legal ownership of a dwelling or land from the date of settlement of the contract of purchase (or if you have a right to occupy it at an earlier time, that time) until the date of settlement of the contract for sale. This period is called your ownership period. If the dwelling is on two hectares of land or less, is your main residence for the whole of the ownership period and you do not use it to produce assessable income, the home if fully exempt. Whether a dwelling is your sole or principal residence is an issue which depends on the facts in each case. Some relevant factors may include, but are not limited to: · the length of time the you have lived in the dwelling · the place of residence of your family · whether you have moved your personal belongings into the dwelling · the address to where you have your mail delivered · your address on the Electoral Roll · the connection of services such as telephone, gas and electricity · your intention in occupying the dwelling. The relevance and weight to be given to each of these or other factors will depend upon the circumstances of each particular case. There is no minimum period of time that you are you are required to live in your dwelling. | Detailed Reasoning - Absence choice: In some cases, you can 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 the dwelling first becomes your main residence. This choice needs to be made only for the income year that the CGT event happens to the dwelling, for example, the year that you enter into a contract to dispose of it. If you make this choice, you cannot treat any dwelling as your main residence for that period (except for a limited time if you are changing main residences). If you do not use it to produce assessable income you can treat the dwelling as your main residence for an unlimited period after you stop living in it. If you do use it to produce income you can choose to treat it as your main residence for up to six years after stop living in it. If you make this choice and as a result of it the dwelling is fully exempt. If you are absent more than once during the period you own the dwelling, the six year maximum period that you can treat it as your main residence while you use it to produce income applies separately to each period of absence. If a dwelling to which the absence rule applies is rented out for more than six years, the dwelling will be partially exempt. | Detailed Reasoning - Domicile (abode): A domicile or abode is considered to be a residence where you have your permanent home or principal establishment and to where, whenever you are absent, you intend to return; every person is compelled to have one and only one domicile at a time. One's legal residence is usually the place where an individual maintains the most important family, social, economic, political and religious ties. | Detailed Reasoning - How this applies to you: In your case, it is clear that you will not be moving back into your unit on a permanent basis and establishing it as your main residence. You are moving from your parent's home into your unit for a short period and after this period you will then return to your parent's home. Based on the information provided, we consider that your normal place of abode is your parent's home as you will not be abandoning it. The six year period commences from the date the dwelling is rented out or from the date it was available for rent. In your case, if you rented out the unit the six year period would be up in approximately 18 months' time. Therefore, if you rent your unit out for more than six year you may be liable for CGT upon its disposal. You will be entitled to partial main residence exemption. Note : You can request a ruling for a specified period. Generally, we do not issue private rulings for more than a five year period. If the legislation changes during the period that relates to your ruling it is no longer binding on the Commissioner.