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Edited version of your private ruling
Authorisation Number: 1012275764119
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Subject: Capital Gains Tax - Main residence - absence rule
Question:
Does the property become your main residence when you move back in and undertake some renovations?
Answer:
No.
This ruling applies for the following period:
Year ended 30 June 2013
The scheme commenced on:
1 July 2012
Relevant facts:
You purchased a property after 20 September 1985 and moved into the property as your main residence.
You moved out of the property after a number of years and relocated interstate.
You listed the property for rent and it has been occupied by a tenant since your departure.
You lived in rented accommodation.
You will return to the property to undertake some renovations.
You will take some personal use items with you and you will put your furniture in a friends shed.
The current tenant has agreed to allow you to stay at the property whilst you undertake the renovations.
You will occupy approximately 25% of the property during this period.
You will take leave from your current occupation to undertake the renovations and you will return to the same position on your return.
Your partner resides in the same state as you and will travel to the property to assist you in some of the renovations.
During the period that you will be occupying the property, you will not be obtaining any rent from the tenant and the tenant will remain in the property.
You do not wish to ask the tenant to vacate the property as they have been a reliable tenant.
You will change your address on the electoral roll and the utilities will also be changed into your name whilst you are undertaking the repairs.
You plan to stay in the property for a period sufficient to complete the renovations and you will return interstate once the works are completed and you will reside with your partner at their residence.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Section 118-145.
Income Tax Assessment Act 1997 Section 118-185.
Income Tax Assessment Act 1997 Section 118-190
Reasons for decision:
Main residence exemption
To qualify for a full main residence exemption the dwelling must have been your main residence for the whole period that you owned it and must not have been used to produce assessable income.
A dwelling is considered to be your main residence from the time you acquired your ownership interest in it if you moved into the dwelling as soon as practicable after that time.
Absence rule
Section 118-145 of the Income Tax Assessment Act 1997 provides that in some situations you can choose to continue to treat a dwelling as your main residence even though you no longer live in it. Generally you can apply this rule for up to six years from when you last resided in the property while it is being rented. You are entitled to another maximum period of six years each time the dwelling again becomes and ceases to be your main residence.
Some factors which need to be considered when determining if a dwelling is a person's main residence include, but are not limited to:
· the length of time the taxpayer has lived in the dwelling
· the place of residence of the taxpayers family
· whether the taxpayer has moved his or her personal belongings into the dwelling
· the address to which the taxpayer has his or her mail delivered
· the taxpayers address on the Electoral Roll
· the connection of services such as telephone, gas and electricity
· the taxpayers intention in occupying the dwelling.
The relevance and weight to be given to each of these or other factors will depend upon the circumstances of each particular case.
In your situation, your partner will reside in X during some of the time you are in Y, you are only taking personal use items to the property, you are returning to the same employment, you have arranged your new accommodation upon your return, and the tenant will be occupying the property whilst you reside in the property.
It is the Commissioner's view that your occupancy of the Y property will be of a transitory nature and accordingly you will not satisfy the requirement that the property became your main residence during the period that you undertake the renovations.
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