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Edited version of your written advice
Authorisation Number: 1012744069818
Ruling
Subject: Main residence exemption
Question 1
Will the sale of both of your properties be covered by the main residence exemption?
Answer
No
This ruling applies for the following period:
Income year ended 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
You purchase a home in X.
You have used this property since purchase as your main residence.
In X you entered into a contract to build a new residence on the property. This construction did not go forward as the builder did not honour this contract.
In X you subdivided a portion of the rear of the land and paid for a section 173 to hold the option with council to possibly build later.
The total property that is your original home and the subdivided section of the property have always been used for private purposes event though they are on separate titles now.
You have chosen not to build and are now considering selling both lots.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-110
Income Tax Assessment Act 1997 section 118-120
Reasons for decision
Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or capital loss if, and only if, a capital gains tax (CGT) event happens to a CGT asset.
Section 104-10 of the ITAA 1997 describes the most common CGT event, being CGT event A1. It provides that CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(2) defines a disposal as:
You dispose of a *CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.
Section 118-10 of the ITAA 1997 provides a CGT exemption for when you dispose of a dwelling which is your main residence. Section 118-120 extends the main residence to include the land adjacent to the dwelling, subject to the following:
• the same CGT event happens to the adjacent land
• the adjacent land was used primarily for private or domestic purposes
• the total area does not exceed 2 hectares.
In your circumstance the main residence will only cover the property on which you currently reside and it's adjacent land on the same title. The other property that is on a separate title will not be covered by the main residence exemption. That property is separate CGT asset and will consequently result in a separate CGT event A1.
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