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Subject: Capital Gains Tax - Main residence - absence choice
Question
Does the Commissioner of Taxation have any discretion to extend the 6 year absence choice?
Answer:
No.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2006
Relevant facts
You purchased a dwelling and moved into the dwelling as soon as practicable.
You subsequently vacated the dwelling and the dwelling was tenanted
You make an absence choice in relation to the dwelling.
You intend to sell the dwelling in the 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 Section 118-145
Income Tax Assessment Act 1997 Subsection 118-145(2)
Reasons for decision
Main residence exemption
Capital gains tax (CGT) is the tax you pay on any capital gain that you make. A capital gain or capital loss is made as a result of a CGT event occurring. The sale of a dwelling is a CGT event A1.
Generally, if you are an individual you can ignore a capital gain or capital loss from a CGT event that happens to your ownership interest in a dwelling that is your main residence.
To get the full exemption from CGT:
§ the dwelling must have been your home for the whole period you owned it;
§ you must not have used the dwelling to produce assessable income and
§ any land on which the dwelling is situated must be two hectares or less.
Main residence exemption absence rule
Section 118-145 of the Income Tax Assessment Act (ITAA 1997) provides that if you leave your dwelling, such that it is no longer your main residence, you may choose to continue to treat it as your main residence, even if you have rented it out, provided certain criteria are met.
Subsection 118-145(2) ITAA 1997 provides that If a dwelling ceases to be your main residence and you use the dwelling to produce assessable income, the maximum period that you can treat it as your main residence is 6 years.
Conclusion
In your case you have purchased a dwelling and used it to produce income for a period of time, and you have made an absence choice. You now intend to dispose of the dwelling and advise that due to factors outside of your control you may not be in a position to do so prior to the expiry of the 6 year period.
While we acknowledge and appreciate your particular circumstances the Commissioner has no discretion to extend the period beyond 6 years where the dwelling has been used to produce income.