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Edited version of your written advice
Authorisation Number: 1012766347019
Ruling
Subject: Main residence exemption
Question
Will adding your parents' names to utility bills affect your eligibility for 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 have invited your parents to live with you at your residence.
You do not intend to charge your parents rent.
You parents are concession card holders.
You intend to add your parents to your utility bills to get the concessional rates.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 102-10
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 118-110
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.
There are however exemptions which can result in any capital gain or loss made due to the disposal of a CGT asset being disregarded. Section 118-110 of ITAA 1997 states that any gain or loss made on the disposal of your main residence is disregarded as long as the property was your home for the entire period of ownership; was not used to produce assessable income; and is situated on two hectares or less.
The CGT regime taxes legal owners on the sale of property; consequently you will be the only party liable for capital gains tax on the sale of the property. As the property is your main residence any capital gain will be disregarded. Adding your parents' names to bills will not affect you eligibility for the main residence exemption.
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