Private ruling: Capital gains tax - main residence exemption
Date of advice: 31 October 2025
Published: 15 December 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you exercise the absence choice for Property B from Date 6 to Date 8? | A1: No. | Q2: Will section 118-140 of the Income Tax Assessment Act 1997 (ITAA 1997) apply on disposal of Property A? | A2: No.

Relevant facts and circumstances: Person A and Person B (You) purchased a property (Property A) around Date one. You resided at Property A until Date 2. On about Date 3, you relocated to City A. Property A was then subject to a fixed-term lease from Date 4 to Date 5. During the period from Date 4 to Date 5, you moved out of Property A and used it to earn assessable income. You exercised the absence choice for Property A for the period from Date 4 to Date 5. On Date 6, you signed a contract to purchase Property B. On Date 7, settlement of Property B occurred. On Date 8, you moved into Property B. The lease for Property A concluded on Date 9. Following the departure of the tenants from Property A, you undertook repairs including replacement of a blind and carpet in one room and repairs to a broken exhaust fan and damaged meter box. You also undertook additional work to restore Property A to a market-ready condition. On Date 10, you engaged a real estate agent to sell Property A. On Date 11, a contract of sale was executed for Property A. On Date 12, settlement of Property A occurred.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-140 | Income Tax Assessment Act 1997 section 118-145

Reasons for decision: Summary: You cannot exercise the absence choice for Property B for the period from Date 6 to Date 8. | Detailed Reasoning - Detailed reasoning: Subsection 118-145(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that if a dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence. This is sometimes referred to as 'the absence choice'. Subsection 118-145(2) of the ITAA 1997 provides that if you use the part of the dwelling that was your main residence for the purpose of producing assessable income, the maximum period that you can treat it as your main residence under this section while you use it for that purpose is 6 years. Subsection 118-145(4) of the ITAA 1997 provides that if you make the choice, you cannot treat any other dwelling as your main residence while you apply this section, except if section 118-140 (about changing main residences) applies. | Detailed Reasoning - Application to your circumstances: 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 a dwelling first becomes your main residence. As you didn't physically move into Property B until Date 8, you can't exercise the absence choice for the period from Date 6 until Date 8. This is because you didn't actually move into the property until Date 8. | Summary: Section 118-140 of the ITAA 1997 will not apply on disposal of Property A. | Detailed Reasoning - Detailed reasoning: Subsection 118-140(1) of the ITAA 1997 provides that if you acquire an ownership interest in a dwelling that is to become your main residence and you still have your ownership interest in your existing main residence, both dwellings are treated as your main residence for the shorter of: (a) 6 months ending when your ownership interest in your existing main residence ends; or (b) The period between the acquisition of the new ownership interest and the time when the ownership interest referred to in paragraph (a) ends. Subsection 118-140 (2) of the ITAA 1997 provides that subsection (1) only applies if: (a) Your existing main residence was your main residence for a continuous period of at least 3 months in the 12 months ending when your ownership interest in it ends; and (b) Your existing main residence was not used for the purpose of producing assessable income in any part of that 12 month period when it was not your main residence. If it takes longer than six months to dispose of your old home, you may get an exemption for the old home for the period in excess of the six months by choosing to treat it as your main residence for that period under the 'continuing main residence status after dwelling ceases to be your main residence' rule. If you do this, you get only a partial exemption when you disposal of your new home. | Detailed Reasoning - Application to your circumstances: As you have used Property A to earn assessable income within the 12 month period prior to disposal, section 118-140 of the ITAA 1997 cannot apply.>