Edited version of private ruling

Authorisation Number: 1011822408670

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Capital gains tax

Questions and answers:

Is the capital gain or loss made on the sale of the property disregarded?

No.

This ruling applies for the following period:

1 July 2010 to 30 June 2011.

The scheme commenced on:

1 July 2010.

Relevant facts:

You had been a joint owner of a residential property (the property) for many years.

You had a 50% share in the property.

You entered into a contract to sell the property in 2011.

You never occupied the property as your main residence. Rather, since you became an owner of the property you have occupied your own home.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 102-5.

Income Tax Assessment Act 1997 Section 102-20.

Income Tax Assessment Act 1997 Section 104-10.

Income Tax Assessment Act 1997 Section 108-5.

Income Tax Assessment Act 1997 Section 108-7.

Income Tax Assessment Act 1997 Section 118-110.

Income Tax Assessment Act 1997 Section 118-185.

Reasons for decision

Capital gains tax (CGT) - general

Real estate acquired on or after 20 September 1985 is a CGT asset.

If you own a CGT asset and a change of ownership occurs from you to another person or entity, you are considered to have disposed of the asset.

When you dispose of a CGT asset, CGT event A1 happens. In the case of real estate, the time of the event is when the contract for the disposal is entered into. If there is no contract, the event occurs when the change of ownership takes place.

When a CGT event happens to a CGT asset you own, you make a capital gain or loss at the time of the event, depending on whether the capital proceeds from the CGT event are more or less than the cost base/reduced cost base of the CGT asset.

Where there is joint ownership of a CGT asset, any capital gain or loss made when a CGT event happens to that asset must be apportioned to each owner in accordance with their ownership interest.

In some cases, an exemption may apply that allows a taxpayer to reduce, or disregard (and therefore not include in their assessable income), any gain or loss made as a result of a CGT event. Where applicable, such exemptions are provided for by the tax law.

The Commissioner has no authority to allow a taxpayer to reduce or disregard any assessable gain outside of the exemptions that are provided for by the tax law.

The main residence exemption

In the case of a residential dwelling that has been disposed of, the CGT main residence exemption may apply in particular cases to allow individuals to reduce or disregard any gain made from the disposal of the dwelling.

This exemption is only available to a taxpayer who has disposed of a dwelling that was their main residence.

To be entitled to a full main residence exemption:

· the dwelling must have been your home for the whole period you owned it,

· you must not have used the dwelling (or the land on which it is situated and adjacent to) to produce assessable income, and

· the land on which the dwelling is situated must be 2 hectares or less.

A partial exemption may be available where any of the above conditions are not met, provided the dwelling has been your main residence for at least part of the period you owned it.

Conclusion

The main residence exemption cannot be applied to your circumstances because you owned the property for many years and have never occupied it as your main residence.

Your assessable income will include any net capital gain you make as a result of the disposal of the property.