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Edited version of your private ruling
Authorisation Number: 1012004604326
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Subject: capital gains tax - main residence exemption - absence choice - ownership interest
Questions and Answers
Question 1: Will your dwelling continue to be treated as your main residence when you have made an absence choice?
Answer: Yes.
Question 2: Will your eligibility to the main residence exemption be affected when your spouse's ownership interest in the dwelling is transferred into your name?
Answer: No.
Question 3: Will the absence choice period start from the date you first rent out your dwelling?
Answer: Yes.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2008
Relevant facts
You and your spouse jointly purchased a dwelling after 20 September 1985.
You lived in the dwelling for a number of years until you moved to another address for a period of time because of work commitments.
The dwelling was rented out a short time after you moved out for a number of months.
You made the absence choice to continue treating the dwelling as your main residence.
You moved back into the dwelling and lived there for a number of months until you again moved out due to work commitments and the dwelling was rented out until the present time.
You made the absence choice to continue treating the dwelling as your main residence.
You and your spouse acquired an investment property under your family trust, which is currently being rented out.
For the purposes of this private ruling, your spouse will transfer their ownership interest in the dwelling to you in the near future.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Subsection 118-145(1)
Income Tax Assessment Act 1997 Subsection 118-145(2)
Income Tax Assessment Act 1997 Subsection 118-145(4)
Reasons for decision
A capital gain or capital loss will occur when a capital gains tax (CGT) event happens to a CGT asset. The most common CGT event is CGT event A1 which occurs when a CGT asset is disposed of.
Generally, you can fully disregard a capital gain or capital loss made on the sale of a dwelling that is your main residence if:
§ the dwelling was your home for the whole period you owned it
§ the dwelling was not used to produce assessable income; and
§ any land on which the dwelling is situated is not more than 2 hectares
These provisions are extended to cover those taxpayers who leave their main residence, but choose to continue to treat it as their main residence even if it is rented out, provided certain conditions are met.
If a dwelling ceases to be a taxpayer's main residence and they use the dwelling to produce assessable income, they can choose to treat the dwelling as their main residence for up to six years after they ceased living in it. This is known as an absence choice.
This choice can be made each time a taxpayer moves out of their main residence and commences renting out the dwelling.
In your case, you and your spouse jointly purchased a dwelling which was your main residence until you moved out and the dwelling was rented out. You made the absence choice in relation to the dwelling, which commenced from the date it was rented out.
You moved back into the dwelling after a period of time and live there for a number of months before again moving out and renting the dwelling. The original absence choice period ceased when you moved back into the dwelling. Upon moving out of the dwelling the second time, you again made the absence choice, which will commence from the date it was rented out on the second occasion, and will continue for up to six years while the dwelling is rented out.
When your spouse transfers their ownership interest in the dwelling, you will own 100% ownership interests in the dwelling. As the dwelling was your main residence prior to the transfer of your spouse's ownership interest, any exemptions that you were entitled to prior to the transfer of your spouse's ownership interest will continue as long as the relevant conditions are met. Therefore, the main residence exemption and the absence choice will apply to the entire dwelling and not just to your original ownership interest.