Private ruling: capital gains tax
Published: April 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a full main residence exemption? | A1: Yes.

Relevant facts and circumstances: You and your spouse purchased a property in 20XX. You originally held it as joint tenants, however in 20YY a transfer was registered and you began holding it as tenants in common. It was the main residence of you and your spouse until 20ZZ. The property was rented out after this time. In 20AA you moved back into the property for about 6 months. It was rented out again after this time. You again moved in for approximately 6 months prior to the sale of the property in 20BB. You have not owned any other property since 20XX and continued to treat the property as your main residence.

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

Reasons for decision: Summary: The main residence exemption is outlined in Subdivision 118-B of the Income Tax Assessment Act 1997 (ITAA 1997). Under section 118-110 of the ITAA 1997 you are eligible for a full main residence exemption if the dwelling has been the family home for you, your partner and other dependents for the whole period you have owned it (ownership period), has not been used to produce assessable income - that is, you have not run a business from it or rented it out, and is on land that is not more than 2 hectares in area. As a general rule, a dwelling is no longer your main residence once you stop living in it. However, in some cases you can choose to have a dwelling treated as your main residence for capital gains tax (CGT) purposes even though you no longer live in it. If you use the dwelling to produce income (for example, you rent it out or it is available for rent) you can choose to treat it as your main residence for up to six years after you cease living in it. If you make this choice, you cannot treat any other dwelling as your main residence for that period. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceased to be your main residence. In this case the property was purchased by you and your spouse in 20XX. You lived in the property until 20ZZ. The property was then rented out, but you continued to treat it as your main residence. You moved back into the property for approximately 6 months in 20AA. You moved out and the property was rented, but you again continued to treat it as your main residence. In 20BB you moved into the property for approximately 6 months prior to its sale. You have never treated any other property as your main residence since 20XX. As each absence period was less than 6 years, you are entitled to a full main residence exemption in relation to this property.