Edited version of private advice

Authorisation Number: 1052202315457

Date of advice: 14 December 2023

Ruling

Subject: CGT - main residence exemption

Question

Are you able to claim the main residence exemption for the sale of your property under section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You and your spouse were born overseas.

You are citizens of XXX.

You are XXXX residents for tax purpose.

You are allowed to remain in Australia from XXXXXX on Tourist Visitor Visa 600.

Your intention is to live in Australia.

You lodge foreign country XXXX tax returns while living in Australia since arrival.

You and your spouse jointly purchased land on XX/XX/20XX and constructed a dwelling that was completed on XX/XX/20XX, (the property).

You moved into the property on XX/XX/20XX.

The property was your main residence and not used for income producing purpose.

Your place of abode is maintained outside Australia in the foreign country XXXX.

A has a property in the foreign country XXXX which is currently unoccupied.

B has a driver's licence in Australia and in the foreign country XXXX.

Your mailing address is in the foreign country XXXX and the mail is forwarded to XXXX in Australia.

You have XXXX on the incoming passenger card when returning to Australia.

You are both retired and receive foreign Pension.

You have no dependants and have a child who is a permanent resident of Australia.

You sold the property on XX/XX/20XX.

You have applied for the XXXX visa which will allow you to stay in Australia permanently.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-110

Reasons for decision

Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) outlines the rules regarding the main residence exemption. To be able to claim the main residence exemption, the taxpayer must be an Australian resident. Generally, foreign residents make a capital gain or capital loss only if a Capital Gains Tax (CGT) event happens to a CGT asset that is a taxable Australian property.

For tax purposes, you are a resident of Australia if you meet at least one of the following tests. You are not a resident of Australia if you do not meet any of the tests. Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered.

•         The resides test (otherwise known as the ordinary concepts test)

•         The domicile test

•         The 183 day test

•         The Commonwealth superannuation fund test.

We have considered your circumstances, and conclude that you were a resident of Australia for the 2023 income year, as follows:

•         You were a resident of Australia according to the resides test.

•         You do not meet the domicile test because your domicile is not in Australia, and the Commissioner is satisfied that your permanent place of abode is outside Australia.

•         You do meet the 183-day test because you were in Australia for 183 days or more during the 2023 income year, and the Commissioner is not satisfied that both:

o   your usual place of abode is outside Australia, and

o   you do not intend to take up residence in Australia.

•         You do not fulfil the requirements of the Commonwealth Superannuation test.

You are on visitor visas, maintained your home overseas and you are citizens of United Kingdom, but your intention is to permanently live in Australia.

To be eligible for a full main residence exemption, the dwelling must have been your main residence for the whole period you owned it and must not have been used to produce assessable income.

Subsection 118-110(1) states that a capital gain or capital loss you make from a CGT event that happens in relation to a CGT asset that is a dwelling or your ownership interest in it is disregarded if:

(a) you are an individual; and

(b) the dwelling was your main residence throughout your ownership period; and

(c) the interest did not pass to you as a beneficiary in, and you did not acquire it as a trustee of, the estate of a deceased person.

In your case, the property was used as the main residence from the time you moved in up to the time of disposal. As the Property has not been used to produce assessable income, you can nominate it as your main residence for an indefinite period.

Section 118-110 of the ITAA 1997 provides that you can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling that is your main residence.

More information

For more information about residency, see Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

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