Private ruling: Capital gains tax - main residence exemption - dependent child
Date of advice: 9 November 2017
Published: March 2018
Ruling period: Year ended 30 June 2017.
Date scheme commenced: 1 January 2003.

Ruling: Q1: Will the sale of the property be exempt from capital gains tax (CGT) and income tax? | A1: Yes.

Relevant facts and circumstances: You are a foreign resident of Australia. In 2003 you acquired a property for your children to live there during their schooling (the dwelling). Following acquisition, two children resided at the dwelling as their main residence: At this stage, one of the children was your dependent child and under 18 years old. The house was used as the main residence of your children until they moved out some years later. After your children moved out, the dwelling remained vacant and was only used on occasions when you or family visited Australia. You will elect to treat the dwelling as your main residence while the dwelling was the main residence of any dependent child under 18 years old. You will elect to treat this dwelling as your main residence for the period you had no dependent children residing at the dwelling. You initially owned a 50% interest in the property, with one of your children owning the other 50% interest; however, you subsequently became the sole owner. The dwelling has not been rented out during your ownership period. You do not own any other properties.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-145 | Income Tax Assessment Act 1997 Section 118-175

Reasons for decision: Summary: Where a dwelling is your main residence and another dwelling is the main residence of a child of yours who is under 18 and is dependent on you for economic support, you must choose one of them as the main residence of both of you. Furthermore, you can choose to continue to treat a dwelling as your main residence after it ceases to be your main residence. Where you do not use the dwelling to produce income, you can treat the dwelling as your main residence for an unlimited period after you stop living in it. In your case, the dwelling will be considered as having been your main residence for the whole of your ownership period of both interests as a result of making the choices to treat the dwelling as your main residence. Accordingly, any capital gain made on the disposal of the dwelling can be disregarded.