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Authorisation Number: 1011666896269

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Ruling

Subject: Capital gains tax- (CGT) main residence- absence choice

Question:

Will any capital gain or loss on the disposal of your dwelling be disregarded?

Yes.

This ruling applies for the following period:

Year ending 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You purchased a dwelling sometime after 20 September 1985, and occupied it as your main residence.

You lived in the dwelling for a period of time and then resided with relatives.

You made the choice to continue to treat the dwelling as your main residence after you moved out.

It is the only property that you own.

The dwelling has been rented out for just over a year.

You plan to sell the dwelling within six years from the date you first owned the dwelling.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20,

Income Tax Assessment Act 1997 Section 104-10,

Income Tax Assessment Act 1997 Section 118-110 and

Income Tax Assessment Act 1997 Section 118-145.

Reasons for decision

Detailed reasoning

Main residence

You make a capital gain or loss when a CGT event happens to a CGT asset. CGT event A1 will happen when you sell your dwelling, including any adjacent land.

Generally, you can disregard a capital gain or a capital loss you make on the sale of your main residence if:

· the property was your main residence for the whole of your ownership period

· you did not earn assessable income from the property while you lived there

· you did not choose to treat any other property as your main residence during any part of your ownership period, and

· the property is less than two hectares in size.

Absence choice

If a dwelling that was your main residence ceases to be your main residence, there are provisions that allow you to extend the main residence exemption beyond the period in which you are occupying the dwelling as your main residence. This means that you can choose to continue to treat it as your main residence after you move out. If you use the part of the dwelling that was your main residence for the purpose of producing assessable income, such as renting the dwelling out, the maximum period you can continue to treat the dwelling as your main residence after you move out, is six years.

If you do not use the dwelling to produce assessable income, for example, rent it out, you can treat it as your main residence indefinitely.

If you make this absence choice, you cannot treat any other dwelling as your main residence during this time.

In your case, you purchased your dwelling sometime after 20 September 1985 and occupied it as your main residence. You moved out of your property to live with your parents and made the choice to continue to treat your dwelling as your main residence. As you plan to rent the dwelling out for a period of less than six years during your absence, and this choice together with the times you lived in the dwelling will cover your entire ownership period, the dwelling is considered to have been your main residence for this entire period.

Therefore, any capital gain or loss that you make on the disposal of the dwelling will be disregarded.