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Edited version of your written advice
Authorisation Number: 1013046929372
Date of advice: 13 July 2016
Ruling
Subject: CGT - main residence exemption
Question 1
Are the payments you receive from your child considered assessable income?
Answer
No
Question 2
Will the payments you receive from your child affect your ability to access the full main residence exemption on your main residence?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commences on:
July 20XX
Relevant facts and circumstances
Your child lives with you in your main residence.
Your receive money each week from your child.
Your child does not otherwise contribute to utilities or household expenses.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5, and
Income Tax Assessment Act 1997 Section 118-110.
Reasons for decision
Income
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income includes all ordinary income derived directly or indirectly from all sources.
Rental income is normally regarded as ordinary income and therefore forms part of the taxpayer's assessable income. However, where there is a non-commercial or domestic arrangement, amounts paid for board or lodging does not give rise to the derivation of assessable income (FC of T v. Groser 82 ATC 4478; 13 ATR 445).
Taxation Ruling IT 2167 considers the consequences of different rental income producing situations. Paragraph 17 of IT 2167 deals with payments by family members of an amount for board and lodging. It states that:
'Arrangements of this nature, whether the payment is said to be for board only or for lodging only or for both, are considered to be in the nature of domestic arrangements not giving rise to the derivation of assessable income by the recipient of the payments. It follows that the question of income tax deductions for losses and outgoings does not arise.'
The principles expressed in paragraph 17 of IT 2167 can be directly applied to your circumstance. It is considered that payments made by your child for day-to-day living expenses such as food, electricity and other living costs are not assessable income under section 6-5 of the ITAA 1997, because the payments have been made in relation to a non-commercial or domestic arrangement which does not constitute assessable income to you.
Capital Gains
Section 118-110 of the ITAA 1997 states that you can disregard any capital gain or loss realised on the disposal of a dwelling that was your main residence for your entire ownership period.
However, a capital gain or loss may only be partially disregarded if the dwelling was
• not your main residence throughout your entire ownership period, or
• used for the purpose of producing assessable income.
In your case, as the payments you receive from your child are not considered assessable income, you will still be entitled to access the full main residence exemption.
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