Private ruling: Capital gains tax - absence choice
Published: July 2011
Ruling period: Year ended 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Question and answer | Will the Commissioner allow further time for you to make an absence choice under section 118-145 of the Income Tax Assessment Act 1997 (ITAA 1997)? | No


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 103-25 | Income Tax Assessment Act 1997 Section 118-145

Reasons for decision: Summary: Subsection 118-145(1) of the ITAA 1997 allows a taxpayer to make a choice that a dwelling continues to be treated as their main residence even though it has ceased to be so. The choice can be made for a total of six years where the dwelling was used for the purpose of gaining or producing assessable income. If an individual does elect to treat a dwelling as their main residence after they have moved out of it, no other dwelling can be treated as their main residence during the same period. Subsection 103-25(1) of the ITAA 1997 provides that a choice must be made: (a) by the day you lodge your income tax return for the income year in which the relevant CGT event happened or (b) within a further time allowed by the Commissioner. The way you (and any other entity making the choice) prepare your income tax return is sufficient evidence of the making of the choice (subsection 103-25(2) of the ITAA 1997). You included a capital gain in your income tax return for the year ended 30 June 2010. This would indicate that you did not make the absence choice at the time you prepared your income tax return. The general rule is that a choice available under the capital gains tax (CGT) provisions, once made, cannot be changed. However, the Commissioner considers that if a taxpayer does not actually consider certain CGT concessions, then it could not be said that the taxpayer actually makes a choice. In determining if the discretion to allow further time would be exercised, the Commissioner has considered the following factors: (a) evidence of an acceptable explanation for the period of extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension) (b) prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension) (c) unsettling of people, other than the Commissioner, or of established practices; (d) fairness to people in like positions and the wider public interest (e) whether any mischief is involved; and (f) consequences of the decision. Your tax return was prepared by a tax agent who has been preparing your tax returns for many years. Considering your tax agent's level of experience, education and skill in preparing tax returns, it is expected that when determining the capital gain liability at the time of preparing your tax return, your tax agent would be aware of relevant CGT concessions available and would ask appropriate questions with regards to those concessions. In considering your situation and the factors above, the Commissioner has not allowed an extension of time to make a choice under subsection 118-145(1) of the ITAA 1997 to treat the property as your main residence.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: You and your spouse purchased an apartment. | You and your spouse lived in the apartment for approximately X weeks. | You and your spouse decided the apartment was not suitable so you moved to another apartment in the same building several floors down. | You have stated the apartment was then rented out from the time you moved out until when you sold it approximately X years later. | You declared a capital gain in your tax return for the year ended 30 June 2010. | You used the services of a tax agent to prepare your 2010 tax return. Our records indicate you have used the services of the same tax agent for at least the past ten years. | You did not own any other property during the time your apartment was rented out. | You and your spouse wish to exercise the absence choice available to elect to continue to treat the property as your main residence from when you stopped living in it.