Edited version of private advice

Authorisation Number: 1052407713613

Date of advice: 12 June 2025

Ruling

Subject: Capital gains tax

Question 1

Are you able to use the market value of the property as of the relevant date when calculating your cost base if you sell the property when you are a non-resident?

Answer 1

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You and your spouse purchased the property a number of years ago.

The property was your main residence until it was rented out.

The property continues to be rented.

You and your spouse relocated to Country Z and reside in Country Z and continue to reside in Country Z indefinitely.

You and your spouse are not residents of Australia for taxation purposes.

You and your spouse are not excluded foreign residents.

You and your spouse do not meet the life events test under section 118-110(5) of the Income Tax Assessment Act 1997.

Relevant legislative provisions

Income tax Assessment Act 1997 section 118-110

Income tax Assessment Act 1997 section 118-192

Reasons for decision

If you are a foreign resident, you are not entitled to the main residence exemption from capital gains tax (CGT) for property sold after 30 June 20XX, unless you satisfy the requirements of the life events test under section 118-110(5) of the Income Tax Assessment Act 1997.

If you don't meet the life events test, you aren't entitled to any main residence exemption, even if you were a resident for some of the ownership period.

Section 118-192 contains a special rule which applies when the taxpayer loses the entitlement to a full main residence exemption because the dwelling was used for income-producing purposes for the first time. Where the following conditions are satisfied, the taxpayer is taken to have acquired the dwelling or the taxpayer's ownership interest in the dwelling immediately before the first time it was used for income producing purposes for its market value at that time:

a.            the taxpayer is only eligible for a partial exemption in relation to the dwelling as it was used for the purpose of producing assessable income during the taxpayer's ownership period

b.            it was first used for income producing purposes after 7.30 pm on 20 August 1996, and

c.             the taxpayer would have been entitled to a full exemption if the CGT event had happened just before the first time (referred to as the income time) it was used for income producing purposes.

You are not able to use the market value when calculating your cost base when you sell the property as you do not meet the above legislative requirements under Section 118-192 of the ITAA 1997.

You would not have been entitled to a full main residence exemption on the property just before you commenced using it for income producing purposes as you need to be a foreign resident for 6 continuous years or less and then satisfy a 'life events' test under 118-110(5).

You and your spouse do not satisfy the life events test.

You are therefore not able to use the Market value of the property when calculating your cost base when the property is sold.

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