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Edited version of private ruling
Authorisation Number: 1011399345211
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Ruling
Subject: Capital gains tax - main residence
Question
Can you apply a main residence exemption to the parts your property that you use as your main residence that is divided by separate titles?
Answer
Yes.
This ruling applies for the following period/s:
Income year ended 30 June 2011
Income year ended 30 June 2012
Income year ended 30 June 2013
Income year ended 30 June 2014
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You purchased a property after September 1985.
The property consists of a number of units and a commercial unit, which you use for income producing purposes.
The units on are used together as your main residence.
You and your family live, eat and sleep in both units.
The units are connected by a staircase, which works as any other internal staircase in a residence and the access is permanently open. The staircase is accessed by one single front door.
It is possible for you to sell the properties separately in the future as the units are all on separate titles.
You pay all costs on the units.
The land on which the unit complex is located is less than two hectares in size.
You are contemplating selling the property within the period of this ruling.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-110,
Income Tax Assessment Act 1997 Section 118-115 and
Income Tax Assessment Act 1997 Section 118-120.
Reasons for decision
The capital gains provisions apply when you dispose of a capital gains tax asset such as your home. You make a capital gain if your capital proceeds exceed the cost base of your asset. You make a capital loss if those capital proceeds are less than the assets reduced cost base.
Certain capital gains and capital losses are disregarded when working out whether a net capital gain is to be included in your assessable income.
As a rule, you can disregard any capital gain or capital loss that you have realised on the disposal of a dwelling that was your main residence.
To be entitled to the full exemption; however:
- the dwelling must have been your home for the whole period you owned it;
- the dwelling must not have been used to produce assessable income; and
- any land on which the dwelling is situated must be two hectares or less.
The term 'dwelling' means a building that consists wholly or mainly of residential accommodation. It also includes the land immediately under the accommodation.
Your land contains a number of units of accommodation and one unit that you use mainly for income producing purposes. As you have occupied some of the units as a single unit of accommodation since you acquired the property, there is a need to determine whether the units of accommodation should be treated as a single dwelling.
Taxation Determination TD 1999/69 considers the situation where more than one unit of accommodation can constitute a dwelling for the purposes of the main residence exemption.
Generally, if the buildings are used together as one place of residence or abode they will be considered as one main residence.
The question of whether they are considered one place of residence is a question of fact and will be determined by considering a number of factors including:
- whether the occupants sleep, eat and live in them
- the distance between and the proximity of the units of accommodation
- whether the units are connected
- whether the units are capable of being sold separately
- the extent to which the daily activities of the occupants in the unit are integrated
- how the units are shared, and
- how the costs of the units are shared by the occupants.
In your case
- your family live, eat and sleep in both units
- the units are located directly above and beneath each other
- the units are connected by a staircase, which works as any other internal staircase in a residence and the access is permanently open
- the units are on separate titles and it is possible that they can be sold separately
- the daily activities of the occupants, namely you and your spouse and your children, who reside with you in the dwelling on a part-time basis, are as normal and expected for people who reside together
- you use the residential units combined as a home, and
- you pay all costs associated with the units.
It is recognised that in most cases, the main residence exemption can only apply to one dwelling at a time.
However, for the purposes of the main residence exemption, and in accordance with the guidelines contained in TD 1999/69 we consider that your use of the residential units allows the main residence exemption to be applied to the units as if they were the one dwelling.
It is therefore considered that the separate units of accommodation of your property may be treated as a single dwelling for the purposes of the main residence exemption.
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