Private ruling: Capital gains tax – main residence exemption
Date of advice: 13 October 2017
Published: March 2018
Ruling period: Year ended 30 June 2018.
Date scheme commenced: 1 July 2017.

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

Relevant facts and circumstances: In 19XX you jointly purchased a property (the Dwelling). You moved into the Dwelling as soon as practicable after purchase and occupied the dwelling as your main residence until the present time. Recently you disposed of a portion of your ownership interest in the Dwelling to your child. You made a capital gain from the disposal of your portion of the Dwelling.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118 - 100 | Income Tax Assessment Act 1997 section 118 - 110

Reasons for decision: Summary: Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) states that capital gains tax (CGT) event A1 happens when you dispose of your capital gain asset. When you sell your main residence you may make a capital gain or loss on the disposal of the Dwelling. This will result in CGT event A1 happening as you will transfer ownership from yourself to another entity. Section 118-110 of the ITAA 1997 allows you to disregard a capital gain or capital loss you make from a 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. 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 the Dwelling in 19XX and moved into it as soon as practicable after purchase and occupied the Dwelling as your main residence until the present time. You disposed of a portion of your ownership interest in the Dwelling to your child. While CGT event A1 occurred when you disposed of a portion of your ownership interest in the Dwelling, the Commissioner is satisfied that you have met the requirements under section 118-110 of the ITAA 1997 and will allow you to claim a full main residence exemption on the disposal of a portion of your ownership interest.

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