Private ruling: Capital gains tax
Date of advice: 19 November 2024
Published: 13 January 2025
Ruling period: Year ended 30 June 2024
Date scheme commenced: 1 July 2023

Ruling: Q1: Are you required to pay Capital Gains tax on the sale of your property which you intended to be your main residence but never moved into the property? | A1: Yes.

Relevant facts and circumstances: You and your partner entered a contract with a builder to build your main residence. You and your partner's relationship broke down prior to the completion of the property. You never moved into the property. The property was rented out. The property was to be your main residence and you had no intention of renting it out prior to the completion of the property.

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

Reasons for decision: Summary: You make a capital gain or loss because of a capital gains tax (CGT) event happening to a CGT asset. CGT assets include real estate acquired on or after 20 September 1985. CGT events are those transactions that occur to a CGT asset that result in you either making a capital gain or capital loss. You make a capital gain if your capital proceeds from the sale of a CGT asset are greater than the cost base for the purchase of that asset, for example, if you receive more for an asset than you paid for it. You make a capital loss if your reduced cost base for the purchase of that asset is greater than the capital proceeds resulting from the sale of that asset, for example, if you receive less for an asset than you paid for it. Capital gains tax is not a separate tax, it forms part of your assessable income and is taxed at your marginal tax rate. | Detailed Reasoning - CGT main residence: 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, and must not have been used to produce assessable income. A mere intention to treat a property as your main residence without moving into it is not enough to get the main residence exemption. In your case you and your partner entered a contract to build your main residence. Your relationship with your partner broke down prior to the completion of the property being built. You never moved into the property. The property was rented out. You are required to pay capital gains tax when the property is sold. There are no exemptions under the legislation to exempt the sale of the property from Capital gains tax.