Private ruling: CGT - main residence exemption
Date of advice: 2 May 2017
Published: September 2017
Ruling period: Year ended 30 June 2008 | Year ended 30 June 2009 | Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2007

Ruling: Q1: Will you be eligible to apply the main residence exemption to the disposal of the property? | A1: Yes.

Relevant facts and circumstances: You purchased your main residence in 200X. You rented the property for a period of 12 months. You moved back in and lived there again for another 12 months. You rented the property for a second time for period of less than six years. You disposed of the property in 201X.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-110 and | Income Tax Assessment Act 1997 Section 118-145.

Reasons for decision: Summary: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you can disregard any capital gain or loss realised on the disposal of a dwelling that was your main residence for your entire ownership period. A capital gain or loss may only be partially disregarded if the dwelling was ● not your main residence throughout your entire ownership period, or ● used for the purpose of producing assessable income. Absence rule Section 118-145 of the ITAA 1997 provides that you can continue to treat a dwelling as your main residence during periods of absence. ● If the dwelling is not used to produce income it can be treated as your main residence indefinitely. ● If the dwelling is used to produce income the maximum period that you can choose to treat it as your main residence, while you use it for that purpose, is six years. If you make this choice, you cannot treat any other dwelling as your main residence while you apply this section. Further, subsection 118-145(2) of the ITAA 1997 states you are entitled to another maximum period of six years each time the dwelling again becomes and ceases to be your main residence. In your case, the property was not rented for more than six years at a time; therefore the absence rule can be applied to continue to treat your property as your main residence during the income producing periods. Subsequently, you will be eligible to apply the main residence exemption to the disposal of the property.