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Edited version of private ruling
Authorisation Number: 1011645016201
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Ruling
Subject: Capital gains tax - Main residence and absence rule
Question: Can you choose to apply the main residence absence rule to your dwelling?
Answer: Yes
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commenced on
I July 2010
Relevant facts
In 2002 you acquired a dwelling (the dwelling).
You moved in established the dwelling as your main residence for approximately five years.
In 2006 the dwelling was valued.
Early 2007 you rented out the dwelling.
You are going to move back into the dwelling prior to early 2013 and establish it as your main residence.
You will reside in the dwelling for a period of six to 12 months.
You will then move into new rented accommodation.
You are going to rent the dwelling for another period of up to six year.
You are going to dispose of the dwelling in the future.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Section 118-145
Reasons for decision
Main residence exemption
Generally, a capital gain or capital loss you make from a capital gains tax (CGT) event that happens to a dwelling that is your main residence is disregarded.
To get the full main exemption from CGT:
· the dwelling must have been your home for the whole period you owned it
· you must not have used the dwelling to produce assessable income, and
· any land on which the dwelling is situated must be two hectares or less.
Continuing main residence status after dwelling ceases to be your main residence
In some cases you can choose to have a dwelling treated as your main residence even though you no longer live in it. You can only make this choice for a dwelling that you have first occupied as your main residence.
If you do not use the dwelling to produce income, you can treat the dwelling as your main residence for an unlimited period after you cease living in it.
Where you use the dwelling to produce income, you can choose to treat it as your main residence while you use it for that purpose for up to six years after you cease living in it. You are entitled to another maximum period of six years each time the dwelling again becomes, and then ceases to be, your main residence.
If you make this choice, you cannot treat any other dwelling as your main residence for that period.
Conclusion
You will be entitled to the main residence exemption as the dwelling will be rented out for a period of less than six years and you have elected to continue to treat this dwelling as your main residence.
Therefore, upon disposal of the dwelling no CGT will be payable.