Private ruling: Capital gains tax - main residence exemption
Date of advice: 16 March 2016
Published: May 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 property where you have not claimed another property as your main residence for the same period? | A1: Yes.

Relevant facts and circumstances: You purchased a property. You took out a home loan to purchase the property. You moved into the property immediately after settlement and lived in there for a period. Your personal belongings were stored in the property immediately after settlement. Gas and electricity were connected immediately and remained until sold. The property's address was on the electoral role. Any absence from the property was due to work commitments or when you had to stay elsewhere, due to personal reasons. You are single. This is the only property you have ever owned. The property has not been used to produce assessable income. The land on which the house is situated is less than 2 hectares. You consider the property to be your main residence for the entire ownership period. The property was sold and settled in the relevant financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 118-B, | Income Tax Assessment Act 1997 section 118-110 and | Income Tax Assessment Act 1997 section 118-145.

Reasons for decision: Summary: Under section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) 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: • you are an individual; and • the dwelling was your main residence throughout your ownership period; and • 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. 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 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. Under paragraph 118-145(3) of the ITAA 1997, if you do not use the dwelling to produce assessable income, you can treat it as your main residence under this section indefinitely. However if you make this choice, you cannot treat any other dwelling as your main residence while you apply this section. As you don't own any other properties and as you did not use your dwelling to produce assessable income, the dwelling can still be considered to be your main residence during any period of absence. This is so long as you elect this property to be your main residence during those periods of absence, in the income year that the CGT event happens. Therefore as you are an individual, the dwelling was your main residence throughout the ownership period, and as 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, you would be entitled to the main residence exemption under subdivision 118-B of the ITAA 1997. Any gain or loss on the disposal of the property asset would be disregarded.