Private ruling: Main residence exemption
Published: December 2012
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2009

Ruling: Q1: Does the six year period commence when the dwelling is first used to produce assessable income? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You purchased a property during the relevant financial year. You immediately moved into the property and made it your main residence. During the subsequent financial year the property was rented out. From that date, you have lived with your parents. You have not treated any other property as your main residence. Your intention is to move back into the property within six years and make it your main residence. You will then rent it out again.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-110. | Income Tax Assessment Act 1997 Section 118-135. | Income Tax Assessment Act 1997 Section 118-145. | Income Tax Assessment Act 1997 Section 118-185. | Income Tax Assessment Act 1997 Section 118-192.

Reasons for decision: Summary: Under section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997), you can disregard a capital gain or capital loss you make when you dispose of a dwelling that is your 'main residence', as long as: • the dwelling was your main residence for the whole period you owned it; and • your interest in the dwelling 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. A dwelling becomes your main residence as long as you occupy it at the time it is first practicable to do so after settlement for the purchase occurs (section 118-135 of the ITAA 1997). | Detailed Reasoning - Period of absence: Section 118-145 of the ITAA 1997 provides that you may continue to treat the dwelling as your main residence despite an absence from the dwelling. This only applies where no other dwelling is treated as your main residence during the period of absence. Where the dwelling is used to produce assessable income, the period of time you may treat it as your main residence is limited to a maximum of six years. The six year period commences when the dwelling is first used to produce assessable income and ends when the dwelling ceases to be used to derive income. In your case, you moved into the property on settlement during the relevant financial year. It was your main residence. The property was used to produce assessable income during the subsequent financial year. Therefore, your period of absence begins on the date that the property was used to produce assessable income. The absence period ceases when the property ceases to be used to produce assessable income.