Private ruling: CGT - main residence exemption
Published: June 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you entitled to a main residence exemption on the sale of your property? | No.

Relevant facts and circumstances: In 2009 you purchased a house and land package at Location X. It was your intention that this dwelling would be your main residence once it was completed. It was your intention that the dwelling that was to be built there would be your main residence once it was completed. By 2011 the dwelling had still not been constructed. Your and your spouse purchased another dwelling at Location Y in 2011 to live in while the dwelling at Location X was to be built. In 2013 building commenced on your dwelling at Location X. Upon completion the dwelling at Location X is to be sold. Neither you, nor your spouse, have lived in, or intend to live in, the dwelling at Location X. You and your spouse are currently living in your dwelling at Location Y.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110.

Reasons for decision: Summary: Pursuant to section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997), a capital gain or capital loss made from a CGT event in respect of a dwelling that is your main residence can be disregarded in certain circumstances. The Guide to Capital Gains Tax 2011-12 on the ATO's website (www.ato.gov.au) outlines some of the criteria used in determining if a dwelling is an individual's main residence, and are as follows: · the length of time the taxpayer has lived in the dwelling; · the place of residence of the taxpayer's family; · whether the taxpayer has moved his or her personal belongings into the dwelling; · the taxpayer's intention in occupying the dwelling. In addition to these criteria, the Guide to Capital Gains Tax 2011-12 states that an intention to construct a dwelling as a main residence is insufficient to obtain the main residence exemption; you must actually occupy the dwelling. In your circumstances, you purchased a house and land package in 2009 at Location X with the intention of constructing a dwelling that would become your main residence. However, due to construction of the dwelling at Location X not commencing until 2013, you and your spouse purchased a dwelling at Location Y that you are currently living in. Upon completion, the dwelling at Location X is to be sold. Neither you, nor your spouse, have lived in, or intend to live in, the dwelling at Location X. Therefore, you are not entitled to the main residence exemption when you dispose of the property. While we appreciate your particular circumstances, the tax law does not provide the Commissioner of Taxation with any discretion to allow you to apply the main residence exemption where it would not otherwise be available to you.