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Edited version of private ruling
Authorisation Number: 1011686897239
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Ruling
Subject: Capital gains tax and the continuing main residence exemption
Question
Will the six year maximum period that you can treat the property as your main residence while it is rented restart when you move out in 2011?
Answer: Yes.
This ruling applies for the following period
1 July 2011 to 30 June 2012
Relevant facts
You purchased a property.
The area of the property does not exceed two hectares.
The property was your main residence.
You started renting out the property.
You do not own any other residence and you resided with your parents until you moved back into the property.
For the purpose of this private ruling you will live in the property for four to six months before moving out again. You will then rent out the property to tenants.
Relevant legislative provisions
Subsection 118-145 (1) of ITAA 1997
Subsection 118-145 (4) of ITAA 1997
Reasons for decision
The six year maximum period that you can treat the property as your main residence while it is rented will restart when you move out in 2011.
Generally, you disregard any capital gain or capital loss that you make on the sale of a property that was your main residence for your entire ownership period.
Whether a dwelling is a taxpayer's main residence is an issue which depends on the facts in each case. Some relevant factors in determining whether a dwelling is your main residence may include, but are not limited to:
· the length of time the taxpayer has lived in the dwelling
· the place of residence of the taxpayers family
· whether the taxpayer has moved his or her personal belongings into the dwelling
· the address to which the taxpayer has his or her mail delivered
· the taxpayers address on the electoral roll
· the connection of services such as telephone, gas and electricity
· the taxpayers intention in occupying the dwelling.
The relevance and weight to be given to each of these or other factors will depend on the circumstances of each particular case.
In some cases, you can choose to continue to treat a property as your main residence even though you no longer live in it. You can only make this choice for a property that you have first occupied as your main residence.
Where you use the property to produce income, for example you rent it out, you can choose to treat it as your main residence while you use it for that purpose for a period of up to six years after you stop living in it.
Where you do not use the dwelling to produce income, you can treat the property as your main residence for an unlimited period after you stop living in it.
If you are absent more than once during the period that you own the property, the six year maximum period that you can treat the property as your main residence while you use it to produce income applies separately to each period of absence.
Each time that you are absent from the property and then re-establish a property as your main residence, there is no qualifying period. The only requirement is that the property becomes your main residence before another six year period applies.
In your situation, you first occupied the property as your main residence and as you do not own any other property you can choose to continue treating the property as your main residence for the first period that you were absent. After you re-establish the property as your main residence and you vacate the property for the second time, the six year maximum period where you can continue to treat the property as your main residence will apply again.
When you dispose of the property in the future it will be at this time that you will be required to choose whether you will treat the property as your main residence for each separate period of absence that does not exceed six years. In the event that you do choose to continue treating the property as your main residence for the each separate period that you are absent, you can disregard any capital gain or capital loss that you make.