Edited version of private advice

Authorisation Number: 1052033998462

Date of advice: 15 September 2022

Ruling

Subject: Main residence exemption

Question 1

Are you entitled to the main residence exemption for the 50% ownership interest in the property you purchased in 20XX?

Answer

Yes.

Question 2

Are you entitled to the main residence exemption for the 50% ownership interest in the property you inherited from the deceased in 20XX?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You and your parent purchased a house together in State A in 20XX.

The property was owned jointly in equal shares with each of you having a 50% ownership interest.

You lived in the house from the time it was purchased in 20XX for approximately X years.

After this time, you moved to State B where you rented a property.

You did not purchase another property.

Your parent continued to live in the house in State A.

In 20XX, your parent passed away and left their 50% share in the property to you under their will.

You continued to rent a property in State B.

To take care of the property, family intermittently lived in the property after your parent passed.

The property was never used to produce assessable income.

In late 20XX you sold the property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-145

Income Tax Assessment Act 1997 section 118-195

Reasons for decision

Question 1

Under section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997), a capital gain or loss from a dwelling is disregarded if the taxpayer is an individual, the dwelling was their main residence throughout the ownership period and the interest did not pass to them as a beneficiary in, or as the trustee of, the estate of a deceased person.

As a general rule, a dwelling is no longer your main residence once you stop living in it. However, in some cases you can choose to have a dwelling treated as your main residence for CGT purposes even though you no longer live in it. You can do this for a dwelling that you have first occupied as your main residence.

Section 118-145 of the ITAA 1997 allows you to treat a dwelling (that was your main residence) as your main residence indefinitely if you do not use it for the purpose of producing assessable income.

Application to your circumstances

You are an individual and the ownership interest did not pass to you as beneficiary in, or as the trustee of, the estate of a deceased person.

As the property was not used for an income producing purpose, you can continue to treat the property as your main residence after you moved out.

You are eligible for the main residence exemption for the 50% ownership interest you purchased in 20XX.

Question 2

Under section 118-195 of the ITAA 1997, a capital gain or capital loss that you make from a CGT event that happens to a dwelling is disregarded if you are an individual and the interest passed to you as a beneficiary in a deceased estate or you owned it as the trustee of a deceased estate, and:

•      The deceased acquired their ownership interest in the dwelling prior to 20 September 1985, or

•      The deceased acquired their ownership interest on or after 20 September 1985 and the dwelling was their main residence just before they passed away and was not then being used to produce income;

And either one of the following conditions also applies:

•      Item 1 - Your ownership interest ends within two years of the deceased's death, or within a longer period allowed by the Commissioner; or

•      Item 2 - The dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of:

a.   the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or

b.   An individual who had a right to occupy the dwelling under the deceased's Will; or

c.   If the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary - that individual

Application to your circumstances

The property was acquired by the deceased after 20 September 1985 and was being used as the deceased's main residence just before they passed away. The property was not being used to produce income.

Your ownership interest did not end within two years of the deceased's death.

Family intermittently lived in the property after the deceased's death. No persons had a right to occupy the property under the deceased's will. You did not live in the property after the deceased's death.

The requirements of the main residence exemption under section 118-195 of the ITAA 1997 are not met.

You are not eligible for the main residence exemption for the 50% ownership interest you inherited from the deceased in 20XX.

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