Private ruling: Capital gains tax - Main residence
Date of advice: 25 February 2016
Published: April 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Can you claim the full main residence exemption on your overseas property where both you and your spouse have not claimed another property as your main residence for the same period? | A1: Yes. | Q2: Can you claim a partial main residence exemption on your overseas property where your spouse has claimed another property as their main residence for the same period? | A2: Yes.

Relevant facts and circumstances: You wholly owned an overseas property. You moved to Australia to stay permanently in the 20XX calendar year. You purchased a property with your spouse as joint tenants in Australia in the 20XX calendar year. You sold your overseas property in September 20YY.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 118-B, | Income Tax Assessment Act 1997 section 118-140, | Income Tax Assessment Act 1997 section 118-145 and | Income Tax Assessment Act 1997 section 118-170.

Reasons for decision: Summary: You are able to claim the main residence exemption for your overseas property, even after you have moved to Australia in certain circumstances. As a general rule, a dwelling is no longer your main residence once you stop living in it. However under Section 118-145 of the Income Tax Assessment Act 1997 (ITAA 1997) you may choose to have a dwelling treated as your main residence for capital gains tax (CGT) purposes even though you no longer live in it. This choice needs to be made only for the income year that the CGT event happens to the dwelling, for example the year that you enter into a contract to sell it. Also under section 118-170 of the ITAA 1997, if, during a period, a dwelling is your main residence and another dwelling is the main residence of your spouse, you and your spouse must either: (a) choose one of the dwellings as the main residence of both of you for the period; or (b) nominate the different dwellings as your main residences for the period. Where you and your spouse both choose to treat the overseas property as your main residence, the property will be qualify for a full main residence exemption. However, neither you nor your spouse will be unable to claim the main residence exemption for your Australian property for the overlapping ownership period. Where your spouse chooses to treat the Australian property as his/her main residence for the entire period, you would only be entitled to a partial (50%) main residence exemption for the overlapping ownership period on the disposal of your overseas property.