Private ruling: Capital gains tax - main-residence exemption
Date of advice: 30 July 2020
Published: September 2020
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: Year commencing 1 July 20XX

Ruling: Q1: Are you eligible for a partial main residence exemption for Property A? | A1: Yes

Relevant facts and circumstances: At the beginning of 19XX, you accepted a position at an educational facility. One of the requirements of the position was that you and your family had to live on the premises near the education facility during certain times of the year. In 19XX, you purchased a property (Property A). You moved in immediately and lived there until early 19XX. You moved your personal belongings there and had water, gas and electricity connected. From that date in 19XX until you retired in 20XX you would return to Property A whenever you were not required at the education facility. You retired at the end of the school year in 20XX and lived permanently at Property A. You undertook substantial renovations and spent money on improvements including costs, water and rates over your time in the house. In 20XX, you purchased another property (Property B). You moved into Property B in 20XX. You have elected that this property will be your main residence from the date of purchase and have changed all relevant documents to reflect this. You have never used Property A for the purpose of gaining or producing assessable income. You have placed Property A on the market.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 section 118-185

Reasons for decision: Summary: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you may disregard a capital gain or capital loss from a CGT event that happens in relation to a dwelling that was your main residence throughout your ownership period. Where a dwelling is not your main residence for the entire period you own it, you will get only a partial exemption. Subsection 118-145(1) of the ITAA 1997 allows you to make a choice that a dwelling will continue to be treated as your main residence even though it has ceased to be so. The choice can be made indefinitely where a dwelling is not used for the purpose of gaining or producing assessable income. In your circumstances, you moved into Property A as soon as your ownership interest in Property A commenced.You returned to Property A on long weekends and school holidays when school was not in session. As you did not use Property A to produce income, you can treat it as your main residence from the time your ownership interest commences for an indefinite period. You have advised that Property A ceased to be your main residence once your ownership interest in Property B commenced. You moved into Property B in XXXX. Therefore, Property A will be exempt from capital gains tax from XXXX when your ownership interest in Property A commenced until XXXX when your ownership interest in Property B commenced .