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Edited version of private advice

Authorisation Number: 1051701398137

Date of advice: 22 June 2020

Ruling

Subject: Capital gains tax- main residence

Question

Can you disregard any capital gain made on the sale of The Property?

Answer

Yes. Generally, you can fully disregard a capital gain or capital loss made on the sale of a dwelling or an ownership interest in a dwelling that is your main residence if:

·         the dwelling was your home for the whole period you owned it

·         the dwelling was not used to produce assessable income, and

·         any land on which the dwelling is situated is not more than 2 hectares.

A dwelling is no longer your main residence once you stop living in it. However, in some casesyou may choose to have a dwelling treated as your main residence for capital gains tax (CGT) purposes even though you no longer live in it. This is known as making an absence choice.

Section 118-145 of the Income Tax Assessment Act 1997 allows you to treat a dwelling as your main residence for a total period of 6 years where it is used to produce income. In your situation, The Property was used to produce assessable income but did not exceed 6 years, therefore you are able to utilise the absence choice. This means that on the sale of your ownership interest in The Property you can disregard any capital gain made.

The new legislation regarding foreign residents and main residence exemption does not apply to you as you sold The Property before the change in legislation (please refer to QC document 55771 on our website).

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You purchased a property (The Property) in 20XX. The purchase price of The Property was $XXX. You and your sibling moved into The Property straight away.

In 20XX, you moved to another country. At this time, you became a non-resident for tax purposes.

Your sibling remained living at the property until 20XX. From that date, the property was available for rent and started generating income from 20XX.

Your sibling moved back into The Property in 20XX (rent free) and remained living there until 20XX.

In 20XX, your sibling moved out again and the property became available for rent again.

In 20XX, a contract of sale was signed. Settlement occurred shortly after.

Between 20XX and settlement date you have never returned to Australia and you lodge tax returns as a non-resident.

You do not own another main residence and rent a property in another country.

You have chosen to continue treating The Property as your main residence for CGT purposes when you stopped living in it.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-145

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