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Edited version of private ruling
Authorisation Number: 1011583838538
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Ruling
Subject: Capital gains tax - main residence exemption
1. Will your share of the capital gains or loss made on the disposal of the dwelling, being your main residence, be disregarded?
Yes.
2. Is your 50% share of all costs associated with the ownership of the dwelling deductible?
No.
This ruling applies for the following periods:
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
The scheme commences on:
1 July 2010
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You plan to purchase a dwelling as tenants in common in equal share (50% each) with your sibling.
You will occupy the dwelling as your main residence.
You will pay 50% of the market rent to your sibling as rental income for their share of the dwelling.
The annual rent is to be ascertained by independent real estate agent and adjusted annually in accordance with market conditions
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
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 118-130.
Reasons for decision
Question 1
Detailed reasoning
You make a capital gain or loss when a capital gains tax (CGT) event happens to a CGT asset. CGT event A1 will happen when you sell your dwelling, including any adjacent land.
When considering the transfer of title, the most important element in the application of the CGT provisions is ownership. In the case of a dwelling that is not a flat or home unit, you have an ownership interest if you have:
· a legal or equitable interest in it, or
· a right to occupy it.
In the absence of evidence to the contrary, property is considered to be owned by the person(s) registered on the title.
Generally, you can disregard a capital gain or a capital loss from a CGT event that happens to your ownership interest in a dwelling that is your main residence if:
· the property was your main residence for the whole of your ownership period
· you did not earn assessable income from the property while you lived there
· you did not choose to treat any other property as your main residence during any part of your ownership period, and
· the property is less than two hectares in size.
In your situation, you plan to occupy the dwelling as your main residence. As you are an individual and provided you do not use the property to earn assessable income during your ownership period, any capital gain or loss on the disposal of the dwelling will be disregarded.
Question 2
Detailed reasoning
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
As you will be occupying the dwelling as your main residence, the expenses you incur will be considered private and domestic in nature. Therefore, these expenses will not be deductible.
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