1011562929201 | Legal database

Disclaimer
This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au

This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private ruling

Authorisation Number: 1011562929201

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Capital gains tax (CGT) and the main residence exemption

Are you entitled to a full main residence exemption when you sell your property?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You purchased a property in the income year ended 30 June 2006.

You lived in the property from the time of settlement for a number of months.

You moved out of the property in the income year ended 30 June 2007.

From the time you moved out the property has been rented out continuously.

You are considering selling the property prior to XXXXX.

You intend to elect to treat the property as your main residence for the period of your absence, when you sell it.

You will not have treated any other property as your main residence.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20.

Income Tax Assessment Act 1997 Section 104-10.

Income Tax Assessment Act 1997 Section 118-110.

Income Tax Assessment Act 1997 Section 118-145.

Reasons for decision

Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you make a capital gain or capital loss if and only if a CGT event happens. CGT events are the different types of transactions or happenings which may result in a capital gain or a capital loss.

The disposal of a CGT asset is the most common CGT event and is referred to as CGT event A1 (section 104-10 of the ITAA 1997). A taxpayer disposes of a CGT asset if a change of ownership occurs from the taxpayer to another entity.

Subsection 104-10(3) of the ITAA 1997 describes when the event happens. The time of the event is either when the taxpayer enters into a contract for the 'disposal', or if there is no contract - when the change of ownership occurs.

In your case, CGT event A1 will happen when you sell your property. The time of the event will be when you enter into the contract for sale.

Section 118-110 of the 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.

However, section 118-145 of the ITAA 1997 provides an exception to this rule. This section states that you may choose to continue to treat a dwelling as your main residence when you cease to live in that dwelling. However, if you use your main residence for the purpose of producing assessable income, the maximum period that you can treat it as your main residence while you are absent is six years.

In your case, when you purchased the property, you used it at your main residence before renting it out and therefore using the property to produce assessable income.

You first used the property to produce income in the income year ended 30 June 2007. This means that the maximum period that you can treat the property as your main residence while you are absent from it is six years from that date.

You have stated that you intend to sell the property within two years and prior toXXXXXX. As this is less than six years from your absence from the property, you satisfy the requirements of section 118-145 of the ITAA 1997 and can elect to treat the property as your main residence for the entire period of ownership.

Please note, however, that if you continue to use the property for income producing activities for longer than six years you will not meet the requirements of section 118-145 of the ITAA 1997 and will not be able to elect to treat the property as your main residence for the entire period of ownership.

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).