Private ruling: Main residence exemption
Date of advice: 9 May 2018
Published: July 2018
Ruling period: 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the capital gains arising from the sale of your share of the property be disregarded in accordance with Sections 118-110 and 118-145 of the ITAA 1997? | A1: No

Relevant facts and circumstances: In mid 201X you purchased Y% of a property owned by Individual A and Individual B at XX Street, Suburb A, State B The property was being used to produce income as a rental and continued in that capacity The structure of ownership became Individual A and Individual B as joint tenants holding a XX% share as tenants in common in unequal shares with you holding the Y% share You entered into a contract for the sale of the property on the mid 201X

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-145

Reasons for decision: Summary: A capital gain or capital loss an individual makes from a Capital Gains Tax (CGT) event that happens to a dwelling is disregarded under section 118-110 of the ITAA 1997 if the dwelling was the taxpayer's main residence throughout the period it was owned. The main residence exemption can apply to up to 2 hectares of land adjacent to a dwelling if the land was used primarily for private or domestic purposes in association with the dwelling: section 118-120 of the ITAA 1997. Section 118-145 of the ITAA 1997 provides that you can continue to treat a dwelling as your main residence during periods of absence. If the dwelling is not used to produce income it can be treated as your main residence indefinitely (subsection 118-145(3) of the ITAA 1997). If the dwelling is used to produce income the maximum period that you can choose to treat it as your main residence, while you use it for that purpose, is six years (subsection 118-145(2) of the ITAA 1997). You are entitled to another period of six years each time the dwelling again becomes your main residence and then commence using it again to produce income. In your case, you did not purchase the Y % share until after the property began to be used as a rental and thus fails to meet the requirements of section 118-110 of the ITAA 1997 as it was not your main residence throughout the period you owned it.