Private ruling: Main residence exemption
Date of advice: 3 August 2016
Published: September 2016
Ruling period: Year ending 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Can you claim the capital gains tax (CGT) main residence exemption for the sale of your property? | A1: Yes.

Relevant facts and circumstances: In 19XX you purchased a property (the property). You moved into the property immediately and it became your principal place of residence. In 19YY you vacated the property to move in with your spouse, you then treated the property as a holiday home. The property was not used to produce income. You and your spouse have an interest in another dwelling. As per subsection 118-170(1) you and your spouse will elect to treat the property as your main residence. From 19YY to current you and your spouse have not treated any other property as your main residence. You intend to dispose of your interest in the property by 30 June 2017.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 subsection 118-170(1)

Reasons for decision: Summary: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling that is your main residence. To qualify for full exemption, the dwelling must have been your main residence for the whole period you owned it, the ownership period, any land on which the dwelling is situated must be two hectares or less, and must not have been used to produce assessable income. Subsection 118-145(1) of the ITAA 1997 states that if a dwelling that was a taxpayer's main residence stops being that taxpayer's main residence, the taxpayer may choose to continue to treat it as a main residence. Further to this, if the dwelling was not used for income-producing purposes during the taxpayer's absence, it can be treated as the taxpayer's main residence indefinitely. A main residence choice must be made: • by the day you lodge your income tax return for the income year in which the relevant CGT event happened • within a further time allowed by the Commissioner. If, during a period, a dwelling is the taxpayer's main residence and another dwelling is the main residence of the taxpayer's spouse only one of the dwellings can be treated as the main residence of both the taxpayer and the spouse for that period. The taxpayer and the taxpayer's spouse do not have to have an interest in each dwelling, for example a taxpayer may nominate a dwelling owned by the taxpayer's spouse as per Taxation Determination TD 92/173. 'Spouse' is defined in subsection 995-1(1) of the ITAA 1997 to include a person who, although not legally married to a person, lives with the person on a genuine domestic basis as the person's husband or wife. In your case, you have purchase a property and it immediately became your principal place of residence. During your ownership period you and your spouse have not treated any other dwelling as your main residence. As you have not used the property to produce assessable income you may choose to continue to treat the property as your main residence, therefore any capital gain (or loss) incurred on the sale of the property can be disregarded.