Disclaimer
This edited version has been archived due to the length of time since original publication.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: 1011593008804

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 - main residence/absence choice

Question

Is any capital gain or loss made upon the sale of your Australian dwelling disregarded?

Yes.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

You are an Australian citizen but a foreign resident for Australian tax purposes.

Your spouse is employed full time in Australia.

You and your spouse acquired a dwelling in Australia after 1985.

The dwelling was purchased in joint names.

The dwelling is situated on less than two hectares of land.

You do not own any other dwellings in Australia that you considered to be your main residence.

The dwelling has been you and your spouse's main residence since purchase.

You have continued to treat the dwelling as your main residence whilst overseas.

The dwelling has not been used for income producing purposes during your ownership period.

You now intend to sell the dwelling.

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

Income Tax Assessment Act 1997 Section 855-15

Income Tax Assessment Act 1997 Section 855-20

Reasons for decision

Capital gains tax and foreign residents

Foreign residents are subject to capital gains tax (CGT) when a CGT event happens to taxable Australian property. Taxable Australian property is defined as real property situated in Australia.

Ordinarily, a foreign resident taxpayer who makes a capital gain on the sale of taxable Australian property would include the capital gain in their assessable income. However, the main residence exemption may apply to disregard any CGT applicable on disposal of the property.

Main residence exemption

Generally, you can disregard a capital gain or capital loss that you make on the sale of a dwelling that is your main residence for your entire ownership period.

To be eligible for the full main residence exemption:

In some cases you can continue to treat a dwelling as your main residence even though you no longer live in it. You can only make this choice for a dwelling that you have first occupied as your main residence. By choosing to do this, you are making an absence choice.

If you do not use the dwelling to produce income, you can treat the dwelling as your main residence for an unlimited period after you cease living in it. 

However if you make this choice, you cannot treat any other dwelling as your main residence for that period. The only exception is where you acquire a new home before you dispose of your old one. In this case, you may be able to treat both as your main residence for up to six months.

In your situation, you have chosen to treat the dwelling in Australia as your main residence for your entire ownership period inclusive of periods of absence whilst working overseas. In addition, the property has never been used to produce assessable income and is situated on land which is less than two hectares.

Based on the above, any capital gain or capital loss realised on disposal of your ownership interest in the Australian dwelling will be disregarded.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

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).