Private ruling: Capital gains tax - non- resident- rental property - main residence - disposal
Published: February 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you liable for capital gains tax on the disposal of your dwelling? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20. | Income Tax Assessment Act 1997 section 104-10. | Income Tax Assessment Act 1997 section 115-10. | Income Tax Assessment Act 1997 section 115-15. | Income Tax Assessment Act 1997 section 115-20. | Income Tax Assessment Act 1997 section 115-25. | Income Tax Assessment Act 1997 section 115-100. | Income Tax Assessment Act 1997 section 118-110. | Income Tax Assessment Act 1997 section 118-150. | Income Tax Assessment Act 1997 section 118-185.

Reasons for decision: Detailed Reasoning - Becoming an Australian resident: There are special capital gains tax (CGT) rules that apply if you are a foreign resident or if you become, or cease being, an Australian resident. Unless otherwise specified, Australian resident means a resident of Australia for tax purposes. If you became a resident after 12 December 2006, and you have taxable Australian property, your ownership in that property starts from the date you purchased the property and not when you become an Australian resident. Taxable Australian property includes a direct interest in real property situated in Australia. | Detailed Reasoning - Capital gains tax: CGT is the tax you pay on certain gains that are made. A capital gain is made as a result of a CGT event occurring to a CGT asset. The most common event, CGT event A1, occurs when you dispose of a CGT asset such as a dwelling. You make a capital gain when your capital proceeds are greater than the cost base of your CGT asset. | Detailed Reasoning - Main residence exemption: Generally, if you are an individual, you disregard a capital gain or capital loss from a capital gains tax (CGT) event that happens to a dwelling that is your main residence. To obtain full exemption from CGT: · the dwelling must have been your home for the whole period you owned it · the dwelling must not have been used to produce assessable income and · any land on which the dwelling is situated must be two hectares or less. If you are not fully exempt, you may be partially exempt if: · the dwelling was your main residence during part of the period you owned it · you used the dwelling to produce assessable income, or · the land on which the dwelling is situated is more than two hectares. | Detailed Reasoning - Application to your case: You acquired a property located in Australia while you were a non-resident. You built a dwelling on the property and once the building was completed, the dwelling was rented out for periods. You obtained your permanent Australian residency in the relevant income year and moved into the dwelling. As you have not lived in the dwelling for all of your ownership period, you are not eligible for a full main residence exemption. You are however eligible for a partial main residence exemption. You calculate the part of the capital gain that is taxable as follows: Capital gain X __ Non-main residence days__ Days in your ownership period Capital gain means the total capital gain you would have made from the CGT event if the main residence exemption had not applied. Non-main residence days are the number of days in your ownership period when the dwelling was not your main residence. You calculate this from the date of settlement for the purchase of the property until the time you moved in. Days in the ownership period means the total number of days in your ownership period and is calculated from the settlement of the contract for purchase until the settlement for sale. Note: You will be able to claim the 50% discount to your capital gain as you are an individual, you disposed of your property after 21 September 1999, you owned the property for more than twelve months before selling it and you have not used the indexation method.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You bought a block of land after 20 September 1985, while you were a non-resident of Australia. | The size of the land is less than 2 hectares. | After a period of time a house was built on the land. | You regularly visited Australia and stayed in the house generally for short periods. | You stayed in the property for X separate periods of approximately one year. During this period you rented out your overseas residence. | During the periods when you were not occupying the property, it was available for rent. | You recently became an Australian resident and moved into the property permanently. | You will sell the property and make a capital gain.