Private ruling: CGT - main residence exemption
Date of advice: 14 November 2024
Published: 13 January 2025
Ruling period: Year ended 30 June XX
Date scheme commenced: XX XX 20XX

Ruling: Q1: Are you eligible for the main residence exemption upon disposal of the property? | A1: No. | Q2: Can you disregard the capital gain or loss from your ownership share on the sale of the property? | A2: No.

Relevant facts and circumstances: On DD MM YY you purchased 1/3 of a share of property with your spouse and family member as tenants in common. From the date of purchase, your family member resided in the property. Due to you and your spouse both working in XX, you rented a place in XX and resided there during the work week. You and your spouse spent your weekends and spare time at the property looking after your family member and maintaining the property. You and your spouse intended to move to the property permanently at the time of your retirement. In 20XX, your spouse passed away. Following probate, your spouse's share of the property was distributed equally to you and your family member. The property was then held by you and your family member in equal shares. In XX 20XX your family member passed away and the property was sold. On XX XX 20XX, a contract was signed for the property and the property settled on the XX XX 20XX. You received 50% of the proceeds from the sale and the remaining proceeds were transferred to your family member's estate.

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

Reasons for decision: Detailed Reasoning - Question 1: Are you eligible for the main residence exemption upon disposal of the property? | Summary: As the property was not your main residence during your period of ownership, you will not be entitled to disregard the capital gain or loss on disposal. | Detailed Reasoning - Main residence: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA1997) states a capital gain or capital loss you make from a CGT event that happens in relation to a CGT asset that is a dwelling or your ownership interest in it is disregarded 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. | Detailed Reasoning - What is a main residence?: Generally, a dwelling is considered to be your main residence if: • you and your family live in it • your personal belongings are in it • it is the address your mail is delivered to • it's your address on the electoral roll • services such as gas and power are connected. To be your main residence, your property must have a dwelling on it and you must have lived in it. | Detailed Reasoning - Application to your situation: In your case, you worked and rented a property in another suburb. You resided at this property during your working week. Even though you attended the other property on the weekends and the property was used for main residence purposes. The property was never established as your main residence throughout your ownership. Therefore, you will not be entitled to the main residence exemption under section 118-110 of the ITAA 1997. | Detailed Reasoning - Question 2: Can you disregard the capital gain or loss from your ownership share on the sale of the property? | Summary: As the property was not your main residence during your period of ownership, any capital gain or loss made on your ownership share on the sale of the property cannot be fully disregarded. | Detailed Reasoning - CGT provisions: Section 104-10 of the ITAA 1997 provides: • a CGT event A1 happens if you dispose of a CGT asset. You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. • you will make a capital gain if the capital proceeds from the disposal of the property are more than the cost base. You will make a capital loss if those capital proceeds are less than the reduced cost base of the property. | Detailed Reasoning - Application to your situation: We accept the dwelling was initially purchased for your family member to reside in as their main residence. As mentioned above the dwelling was not your main residence throughout your ownership period, therefore you cannot disregard the capital gain or loss on disposal of the property under section 104 -10 of the ITAA 1997. As you held the asset for more than 12 months you will be entitled to the 50% CGT discount on your ownership share of the capital gain when the property was disposed of.