Private ruling: CGT - main residence exemption
Date of advice: 8 October 2024
Published: 18 November 2024
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: XX 20XX

Ruling: Q1: Does Capital Gain Tax (CGT) event A1 occur on the disposal of the property? | A1: Yes. A CGT event A1 occurs when you dispose of a CGT asset. In your case, you disposed of your property, so a CGT event A1 occurred. | Q2: Did the CGT event A1 occur when the contract of sale of the property is entered into? | A2: Yes. A CGT A1 occurs when you dispose a CGT asset. You dispose of a CGT asset if a change of ownership occurs from you to another entity. In your case, you entered into contract of sale of your property, you changed the ownership of the property from you to another entity, so the CGT event A1 occurred. | Q3: Does the main residence exemption apply to the disposal of the property? | A3: Yes. You are able to claim a partial exemption from CGT for your dwelling and up to 2 hectares of the land (including the area of the land immediately under the dwelling). The land that exceeds 2 hectares is subject to CGT as it is not covered by the main residence exemption. | Q4: Does market value substitution rule apply to the sale? | A4: Yes. You are taken to have acquired the dwelling or your ownership interest at the time it was first used to produce income for its market value at that time. | Q5: Does the 6-year absence rule apply to the sale? | A5: Yes. Because you used your dwelling that was your main residence for the purpose of producing assessable income, you can choose to treat it as your main residence while you use it for that purpose up to 6 years. The period that exceeds the 6-year limit is subject to CGT.

Relevant facts and circumstances: You purchased the vacant land after 20 September 1985. The land is over than 2 hectares in size. You intended to build a home and use it as your main residence. XX 20XX, you married and moved into the shed and caravan located on the land. XX 20XX, you applied for the planning permits required to construct the residence and the final permit was issued in XX 20XX. In 20XX, the final certificate of occupancy was issued to your property (the property). You moved into the house and claimed it as your main residence immediately once liveable. During the construction period, you and your spouse lived on the property using both the shed and caravan. On XX 20XX, you moved to another state with your family and began renting out the property. On XX 20XX, you and your spouse divorced. You retained custody of your children. On XX 20XX, you moved back to the property with your children to use it as your main residence. On XX 20XX, you entered into a contract to sell the property. The settlement date will be 48 months after the contract of sale date.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-115 | Income Tax Assessment Act 1997 Subsection 118-120(3) | Income Tax Assessment Act 1997 Subsection 118-145(2) | Income Tax Assessment Act 1997 Section 118-190 | Income Tax Assessment Act 1997 Subsection 118-192(2)