Edited version of private ruling

Authorisation Number: 1011861937887

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Ruling

Subject: Capital gains tax - tenant in common- main residence exemption

Question1: Will a main residence exemption apply to your fractional ownership in the dwelling occupied by you?

Answer: Yes.

Question 2: Will the main residence exemption apply to your fractional ownership in the dwellings not occupied by you and the land that exceeds 2 hectares?

Answer: No

This ruling applies for the following period:

Year ended 30 June 2010.

The scheme commences on:

1 July 2009.

Relevant facts and circumstances

You and your then spouse purchased a fractional share in a property.

You and your then spouse were tenants in common having bought the fractional interest in the whole of the property.

The property consisted of greater than two hectares of rural land and had multiple dwellings.

When you purchased your share in the property, some of the special conditions inserted as additional clauses as a part of the sale where as follows:

· 'You are only buying a fractional interest in the whole of the property. There is no legal right to any specific part of that land.'

· 'You acknowledge that there is an informal and non-written arrangement between the seven owners that they each have, or can build a house on the land and that you have exclusive possession of one of the houses.'

· 'You acknowledge that you cannot force the Vendor as a condition of this contract to obtain a written agreement confirming your exclusive right to one of the houses.

One of the houses was used as your; and your then spouse's main residence until your marriage breakdown. On the breakdown of your marriage you purchased your spouse's share under a binding financial agreement registered with the family court. The house continued to be your main residence until your fractional interest in the property was sold.

You sold your fractional interest in the property during the year ended 30 June 2010.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10,
Income Tax Assessment Act 1997 Section 108-5,

Income Tax Assessment Act 1997 Section 118-110,
Income Tax Assessment Act 1997 Section 118-120,
Income Tax Assessment Act 1997 Section 118-125 and
Income Tax Assessment Act 1997 Section 118-130.

Reasons for decision

Tenancy in common means that two or more parties own the property and their respective interests are specified. Tenancy in common arrangements, have the following characteristics:

· The interests of the co-owners as tenants in common need not be equal or identical;

· Tenants in common must return income and expenses according to their ownership share in the property;

· Each party's interest is documented on the title deed; and

· Any agreement (whether written or oral) which purports to vary this basis of distribution or ownership will not be effective for tax law purposes.

In your circumstances, you are the legal owner of a fractional of the property, which means you own fractional interest of the land, (being no specific part) and fractional interest in each of the separate dwellings.

You will be entitled to a main residence exemption on the fractional ownership interest in the house you and your then spouse occupied because this dwelling was your main residence during your entire ownership period.

The main residence exemption extends to adjacent land, up to a maximum area of two hectares. For you this means your main residence exemption will extend to your fractional interest in two hectares of adjacent land.

You will not be entitled to any main residence exemption for your fractional interest in the other dwellings and land in excess of two Hectares because you have not lived in them as your main residence.