Edited version of private advice

Authorisation Number: 1052411841053

Date of advice: 25 June 2025

Ruling

Subject: CGT - main residence exemption

Question 1

Can you claim the main residence exemption for the Units under section 118-115 of the Income Tax Assessment Act 1997 (ITAA 1997) as a single dwelling under Subdivision 118-B of the ITAA 1997 for the period of ownership?

Answer 1

Yes

This ruling applies for the following periods:

The Ruling ends when the Units are sold.

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

1.            You are spouses who ordinarily reside in Australia for income tax purposes.

2.            You entered into a contract as joint tenants to purchase the Units.

3.            The contract is due to settle in May 20XX.

4.            The Units are on separate titles and directly adjacent to each other. The Units are located on the X floor.

5.            The Units are not internally connected but share a wall and are linked by a common lobby.

6.            Personal items and furniture will be shared between the Units.

7.            Each Unit consists of a number of bedrooms and bathrooms.

8.            You intend to use both the Units as your primary residence. You will not produce assessable income from either Unit.

9.            You currently reside with each other and no family members.

10.         You also intend to use the Units to host extended family as they frequently visit and stay for extended periods of time. When they visit, you will continue living across both Units while accommodating extended family.

11.         The Units will be used for domestic and private purposes only, including but not limited to work, hobbies and relaxation activities across both Units.

12.         The Units will be used for the preparation of food, sleeping, and day-to-day activities interchangeably. You have provided the below examples:

•                     You do not intend to prepare food, cook and eat in the same unit you will use to sleep in;

•                     When you enjoy entertainment activities such as music or audio-visual entertainment, you will often use those facilities in the other unit to the one they are sleeping in;

•                     When either of you work from home, you will use the unit that is least disruptive to the other on that day;

•                     You will use the bathrooms in both Units;

•                     Utility services such as water, gas and electricity will be connected to the Units and in both names as a joint expense;

•                     You both will be responsible for the mortgages held over the Units and any other costs of ownership (including all bills and strata fees) will be the responsibility of both of you. The mortgage will secure a single loan for the acquisition of the Units;

•                     Your mailing, electoral roll and billing address will be changed to the address of one, either or both of the Units, as circumstances require;

•                     You will occupy the Units as your home for the entire period of ownership.

Relevant legislative provisions

The Income Tax Assessment Act 1997 section 118-110

The Income Tax Assessment Act 1997 section 118-115

The Income Tax Assessment Act 1997 section 118-140

The Income Tax Assessment Act 1997 section 118-145

The Income Tax Assessment Act 1997 section 118-185

Reasons for decision

Issue 1

Question 1

Summary

Weighing up the factors in paragraph 4 of TD 1999/69 we consider both units will genuinely be used together as one place of residence, meaning the units are considered one dwelling when applying the main residence exemption in section 118-110 of the ITAA 1997. Pursuant to meeting the criteria under Subdivision 118-B of the ITAA 1997, the Ruling will be in effect until the disposal of the Units. The Units are still capable of being sold separately.

Detailed reasoning

You get an exemption from Capital gains tax (CGT) in relation to a dwelling that is your main residence. This is called the main residence exemption (section 118-110 of the ITAA 1997).

You only get a partial exemption if the dwelling was used as your main residence for part of the period of ownership (section 118-185 of the ITAA 1997).

When you buy a new main residence you can continue to treat your previous main residence as exempt from CGT for a period of up to 6 months while you sell that main residence. This is provided you lived in your previous main residence for a continuous period of 3 months in the 12 month period prior to its sale. Your new main residence is also treated as being exempt from CGT during this time (section 118-140 of the ITAA 1997).

Otherwise, you can only claim the main residence exemption for one property at a time (section 118-145 of the ITAA 1997).

The testing for determining whether a dwelling is a main residence is contained in Subdivision 118-B of the ITAA 1997.

'Dwelling' is defined in subsection 118-115(1) of the ITAA 1997 to include:

a)            a unit of accommodation that:

                             i.                is a building or is contained in a building; and

                            ii.                consists wholly or mainly of residential accommodation; and

b)            a unit of accommodation that is a caravan, houseboat or other mobile home; and

c)            any land immediately under the unit of accommodation.

'Dwelling' is not otherwise defined and so takes on its ordinary meaning. The Macquarie Dictionary defines 'dwelling' as 'a place of residence or abode; a house'.

In Campbell v O'Sullivan [1947] SASR 195 at 201, May J stated that:

..."dwelling" ordinarily signifies a place of abode or residence, a tenement, habitation or house, which premises a person or persons are using as a place for sleeping and usually for the provision of some meals.

Taxation Determination TD 1999/69 Income tax: capital gains: can the term 'dwelling' as defined in section 118-115 of the Income Tax Assessment Act 1997 include more than one unit of accommodation? (TD 1999/69) confirms that the term 'dwelling' as defined in section 118-115 of the ITAA 1997 can include more than one unit of accommodation where the units of accommodation are used together as one place of residence or abode.

Whether two or more units of accommodation are used together as one place of residence or abode for the purposes of the definition of 'dwelling' is a question of fact that depends on the particular circumstances of each case.

Paragraph 4 of TD 1999/69 provides the following factors as relevant in considering whether multiple units of accommodation may be considered one residence or abode:

a)            whether the occupants sleep at and live in them;

b)            the distance between and the proximity of the units of accommodation;

c)            whether the units are connected;

d)            whether the units are capable of being sold separately;

e)            the extent to which the daily activities of the occupants in the units are integrated;

f)             how the units are shared by the occupants; and

g)            how the costs of the units are shared by the occupants.

The presence or absence of any of these factors are not necessarily determinative as all the facts and circumstances of each particular case needs to be considered as a whole.

Application to your circumstances

Weighing up the factors in paragraph 4 of TD 1999/69 we consider on the facts you have described both units will genuinely be used together as one place of residence, meaning the units are considered one dwelling when applying the main residence exemption in section 118-110 of the ITAA 1997. Pursuant to meeting the criteria under Subdivision 118-B of the ITAA 1997, this Ruling will be in effect for each unit until disposal (so long as the unit(s) continue to be used as your main residence in the way you have described). As the Units are considered one dwelling under TD 1999/69, if one Unit is sold separately to the other that will be considered a part sale of your main residence and will be eligible for the main residence exemption under section 118-110 of the ITAA 1997.

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