Private ruling: Capital gains tax - main residence exemption
Date of advice: 15 May 2025
Published: 21 July 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 01 July 20XX

Ruling: Q1: Will you be able to claim the main residence exemption on the disposal of your interest in the first property up to the time that you commenced owning the second property? | A1: Yes. Based on the information provided to the Commissioner you can make an election under section 118-145 of the Income Tax Assessment Act 1997 (ITAA 1997) to treat the first property as your main residence up until you purchased the second property. CGT would not apply on the first property, but CGT would apply to the first property for the relevant period if you treat the second property as your main residence. | Q2: Are you able to use the main residence exemption for the whole of your ownership period up until you transfer your share of the first property to your ex-spouse? | A2: Yes. Based on the information provided to the Commissioner you can use the election under section 118-145 of the ITAA 1997 to treat the first property as your main residence for the whole of your ownership period up to the date you transfer your interest in the first property to your ex-spouse. This would then mean you cannot treat the second property as your main residence for the same period from the date you purchased the second property to the date of the transfer of your ownership interest in the first property to your ex-spouse. The second property would be subject to CGT from the date you purchased the second property to the date of the transfer of your ownership interest in the first property to your ex-spouse.

Relevant facts and circumstances: A number of years ago, you and your ex-spouse purchased the first property. Several years after the purchase, your marriage broke down and you moved out of the property and from that time you were living permanently apart. A couple of years after the separation, your divorce was granted. A Family Law Court granted consent orders which stated that the property would be sold within a number of years or at such other time as agreed to by you and your ex-spouse and the proceeds from the sale of the property to be divided equally between you. In accordance with the court orders, the legal ownership of the property was changed from joint tenants to tenants in common in equal shares. The property has continued to be held in both you and your ex-spouse's names. Your ex-spouse continues to live in the property, paying for the holding costs including insurance and council rates and maintaining the property in good condition. You have contributed minimal funds to the upkeep of the property. Since leaving the property you have lived in a number of rental properties. A few years ago, you purchased the second property. You intend on transferring your ownership interest of the first property to your ex-spouse at some stage in the future. You can make an election under section 118-145 of the ITAA 1997 to either treat the first property as your main residence from the date it was purchase to the date you purchased the second house or from the purchase date to the date you transfer the first property to your ex-spouse.

Relevant legislative provisions: Income tax Assessment Act 1997 section 118-145