Private ruling: Capital gains tax - main residence exemption
Date of advice: 24 September 2015
Published: September 2015
Ruling period: Year ending 2016.
Date scheme commenced: 1 July 2015

Ruling: Q1: Can you claim the capital gains tax (CGT) main residence exemption for the sale of your property? | A1: Yes.

Relevant facts and circumstances: You purchased a property in 20XX and moved into the property in 20XX. You did not rent out the property between 20XX and 20XX. You moved for work in 20YY and rented out the property. You did not purchase a new property; you simply rented. You are now selling your property.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110, | Income Tax Assessment Act 1997 subsection 118-110(1), | Income Tax Assessment Act 1997 section 118-145 and | Income Tax Assessment Act 1997 subsection 118-145(2).

Reasons for decision: Summary: Section 118-100 of the Income Tax Assessment Act 1997 (ITAA 1997) states: You can ignore 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. Section 118-145 of the ITAA 1997 extends the general rule and provides that if a dwelling ceases to be your main residence, you may choose to continue to treat it as your main residence in certain circumstances. 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. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence. Application to your circumstances Your initial purpose for the property was for a main residence. Although you used the property to produce assessable income after you moved out, the absences rule detailed in Section 118-145 of the ITAA 1997 extends the exemption. You intend to sell your property in the 2016 year which is within the time frame for the absences rule. You are eligible for the main residence exemption under section 118-100 of the ITAA 1997.