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Edited version of private ruling
Authorisation Number: 1011816391979
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Ruling
Subject: Capital gains tax - main residence and absence choice
Question: Can the main residence absence choice be applied to your dwelling for the period you are overseas?
Answer: Yes.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You have undergone a marriage breakdown.
You are moving into a new home (dwelling) within a few weeks.
The dwelling was owned by a family company and was part of a marriage breakdown agreement.
You have the opportunity to house swap for a period of three months in another country.
You will use this opportunity to further your studies.
The house swap will involve no remuneration.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Section 118-180
Income Tax Assessment Act 1997 Section 118-145
Income Tax Assessment Act 1997 Section 118-185
Income Tax Assessment Act 1997 Section 126-5
Income Tax Assessment Act 1997 Section 126-15
Reasons for decision
Main residence exemption
A capital gain or capital loss made from a capital gains tax (CGT) event that happens in relation to a CGT asset that is a dwelling or your ownership interest in it is disregarded if:
· you are an individual, and
· the dwelling was your main residence throughout ownership period, and
· the interest did not pass to you as a beneficiary in and you did not acquire it as a trustee of, the estate of a deceased person.
Absence choice
In some cases, you can choose to continue to treat a dwelling as your main residence even though you no longer rive in it. You cannot make this choice for a period before a dwelling first becomes your main residence.
If you make this choice you cannot treat any other dwelling as your main residence for that period (except for a limited time if you are changing main residences).
If you do not use the dwelling to produce income - for example, you leave it vacant or use it as a holiday home - you can treat the dwelling as your main residence for an unlimited period after you stop living in it.
In your case, you will have established the dwelling as your main residence, you are choosing to continue to treat the dwelling as your main residence and the dwelling will not be used for income producing purposes during the period you are overseas.
Therefore, the main residence exemption will apply for the period you are overseas.
Further information
Marriage breakdown
If you transfer an asset to your spouse of a marriage breakdown, there is an automatic rollover in certain cases. You cannot choose whether or not it applies. This rollover ensures the transferor spouse disregards a capital gain or capital loss that would otherwise arise. In effect, the one who receives the asset (the transferee spouse) will make a capital gain or capital loss when they subsequently dispose of the asset. If you are the transferee spouse, the cost base of the asset and its original acquisition date are transferred to you.
For the rollover to apply, the CGT event must have happened because of:
· an order of a court or court order made by consent under the Family Law Act 1975 or a similar law of a foreign country, or
· a court order under a state, territory or foreign law relating t breakdown of relationship between spouses.
A dwelling acquired by you as a result of a marriage breakdown from a company or trustee is treated as if it were owned by you during the period when it was actually owned by the company or trustee if:
· you acquired the interest from the company or trustee, and
· the dwelling was acquired by the company or trustee on or after 20 September 1985, and
· marriage breakdown rollover was available to the company or trustee.
However, in these circumstances the dwelling cannot be treated as your main residence during the period when it was owned by the company or trustee, even if you had resided in the dwelling when it was owned by the company or trustee. As stated above the main residence exemption only applies to the ownership of an individual and not to a company or a trustee.
As a result, the dwelling is only your main residence for the period you actually resided in it after it was transferred to you.
On the subsequent disposal of the dwelling you will only qualify for a partial exemption, as the dwelling is not taken to be your main residence throughout your ownership period.
For further information please see the enclosed sheet, this information has been taken from the Guide to capital gains tax 2009-10.