Edited version of private ruling

Authorisation Number: 1011566640507

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Ruling

Subject: Capital gains tax - rollover relief, main residence exemption

Issue 1

Question 1

Can you choose to apply rollover relief due to the compulsory acquisition of your property?

Answer

Yes.

Issue 2

Question 1

Is six months the maximum time limit that both dwellings can be treated as your main residence?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 2011

The scheme commenced on:

02 July 2010

Relevant facts and circumstances

You purchased a property with your spouse.

The property was larger than 2 hectares

It has been used as your main residence

The property was compulsorily acquired by a government body.

Prior to the compulsory acquisition of your property you purchased another property solely in your name.

You and your spouse relocated to the property solely in your name after disposing of the property that was compulsorily acquired.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 124-70,

Income Tax Assessment Act 1997 Section 124-75, and

Income Tax Assessment Act 1997 Section 118-140

Reasons for decision

Rollover Relief

Subdivision 124-B of the Income Tax Assessment Act 1997 (ITAA 1997) allows a taxpayer to choose roll-over relief for involuntary disposals where either money, a CGT asset or a combination of both are received as compensation. A taxpayer can obtain roll-over relief in respect of a CGT asset that is compulsorily acquired by an Australian government agency.

In order to obtain roll-over relief a taxpayer must receive money or another asset, or both as compensation. Where money is received as compensation, the money must be spent in acquiring a replacement CGT asset and at least some of the money must be spent within one year before the disposal event or within one year after the income year in which the event occurs.

In your case, your asset was compulsorily acquired by an Australian government agency and you received money as compensation for the acquisition. You have used the money received to acquire a replacement CGT asset within one year before the disposal event. As a result, you can choose to apply roll-over relief on the purchase of the other property.

Main Residence

If you acquire a new home before you dispose of your old one, both dwellings are treated as your main residence for up to six months if:

The old dwelling was your main residence for a continuous period of at least three months in the 12 months before you disposed of it.

You did not use the old dwelling to produce assessable income in any part of that 12 months when it was not your main residence and

The new dwelling becomes you main residence.

If you dispose of the old dwelling within six months of acquiring the new one, both dwellings are exempt for the whole period between when you acquire the new one and dispose of the old one.

If it takes longer than six months to dispose of your old home, both homes are exempt only for the last six months before you dispose of the old one.

The Commissioner has no discretion to extend the six month period that both homes are considered to be your main residence.