Edited version of private ruling

Authorisation Number: 1011772291512

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Ruling

Question and Answer

Are you entitled to the main residence exemption on property one?

Yes.

This ruling applies for the following period

1 July 2009 to 30 June 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Property one

In xx you purchased a property as your main residence.

In xx you were transferred for work.

You leased your main residence.

You did not nominate any other residence as your main residence.

In xx you returned to reside in your main residence and take up new employment.

In xx you sold your main residence.

Property two

In xx you purchased an investment property and renovated.

In xx you sold the investment property.

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 118-135

Income Tax Assessment Act 1997 Section 118-145

Reason for Decision

Capital gains tax (CGT) is the tax that you pay on any capital gain you include on your annual income tax return. It is not a separate tax, merely a component of your income tax.

You make a capital gain or capital loss as a result of a CGT event.

The most common CGT event is CGT event A1. Under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997), a CGT event A1 happens when you dispose of an asset to someone else, for example if you sell or otherwise dispose of a dwelling.

CGT event A1 will happen when you dispose of your interest in the property. The time of the event is when you entered into the contract for the disposal.

There are some circumstances where capital gains tax would not be payable even though a gain has been made as a result of a CGT event.

Main residence exemption

Generally, you disregard any capital gain or capital loss made on a dwelling where

· you move into it as soon as practicable after you acquired it, (section

· 118-135 of the TAA 1997);

· you have occupied the dwelling as your main residence throughout your ownership period (section 118-110 of the ITAA 1997);

· the dwelling has not been used to produce assessable income;

· any land on which the dwelling is situated is 2 hectares or less

Periods of absence from your main residence

Under section 118-145 of the ITAA 1997, once a property has been established as your main residence, you may continue to treat that dwelling as your main residence during periods of absence.

Where the property is rented, the maximum period that you may continue to treat the dwelling as your main residence is six years. You are entitled to another maximum period of six years each time the dwelling again becomes and ceases to be your main residence.

If you choose to treat a dwelling as your main residence you cannot treat any other dwelling as your main residence.

Application to your circumstances

You elected property one as your main residence. The property was leased for a period of less than six years and you did not nominate any other dwelling as your main residence.

Therefore you are entitled to the main residence exemption for property one.