Private ruling: CGT - main residence exemption
Published: June 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Question and answer | Are you entitled to a main residence exemption on the sale of your property? | No.

Relevant facts and circumstances: In 20XX you and your family moved from Location X to Location Y to commence building a dwelling. It was your intention that this dwelling be your main residence once it was completed. While building your dwelling in Location Y you were living in a rental property and your children were enrolled in the local school. In the relevant year you and your family returned to Location X for medical reasons. You are planning to sell the dwelling in Location Y to finance your move back to Location Y. Neither you, nor your spouse, have lived in the dwelling in Location Y.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110.

Reasons for decision: Summary: Pursuant to section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997), a capital gain or capital loss made from a CGT event in respect of a dwelling that is your main residence can be disregarded in certain circumstances. The Guide to Capital Gains Tax 2011-12 on the ATO's website (www.ato.gov.au) outlines some of the criteria used in determining if a dwelling is an individual's main residence, and are as follows: · the length of time the taxpayer has lived in the dwelling; · the place of residence of the taxpayer's family; · whether the taxpayer has moved his or her personal belongings into the dwelling; · the taxpayer's intention in occupying the dwelling. In addition to these criteria, the Guide to Capital Gains Tax 2011-12 states that an intention to construct a dwelling as a main residence is insufficient to obtain the main residence exemption; you must actually occupy the dwelling. In your circumstances, you moved from Location X to Location Y with the intention of constructing a dwelling that would become your main residence. However, in the relevant year you and your family returned to Location X for medical reasons. Neither you, nor your spouse, have lived in the dwelling in Location Y. Therefore, you are not entitled to the main residence exemption when you dispose of the property. While we appreciate your particular circumstances, the tax law does not provide the Commissioner of Taxation with any discretion to allow you to apply the main residence exemption where it would not otherwise be available to you.