Edited version of your private ruling

Authorisation Number: 1012020368256

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. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Subject: Capital Gains Tax - Main residence - absence choice

Question

Is the capital gain on the disposal of property 'A' disregarded?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

You purchased a property after 20 September1985 (Property 'A')

You lived in the property as soon as practicable for a period of time

You then tenanted the property for a period of time

You then moved back into the property for a period time

You then tenanted the property for a period of time

You then moved back into the property.

For each of the above absences you have chosen to continue to treat the property as your main residence.

You intend selling the property and you will make a capital gain.

You purchased a new property (property 'B') which you have used as your main residence.

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 118-110

Income Tax Assessment Act 1997 Section 118-140

Income Tax Assessment Act 1997 Section 118-145

Reason for decision

Your net capital gain is included in your assessable income by Section 102-5 of the Income Tax Assessment Act 1997 (ITAA 1997). The net capital gain is calculated by subtracting any capital losses that you may have accrued from your capital gains made in that financial year.

The relevant provision in relation to this is section 102-20 of the ITAA 1997 which states that you can only make a capital gain or loss if a capital gains tax (CGT) event happens. The CGT event would be the sale of your property and would be classed as an A1 event.

Main Residence Exemption

This exemption is one such exemption and is provided for in section 118-110 of the ITAA 1997. This section states that you are exempt from CGT if you dispose of a property if that property is your main residence throughout your ownership of the property.

Changing Main Residence

A relevant section in your particular circumstances is subsection 118-140(1) of the ITAA 1997 which provides that if you acquire an ownership interest in another property and intend to use it as your main residence; you are able to treat your original property and your newly acquired property as your main residence for a maximum period of six months.

Subsection 118-140(2) of the ITAA 1997 provides that the exemption outlined in subsection 118-140(1) of the ITAA 1997 only applies if;

§ Your original main residence was your main residence for a minimum of three months in the twelve months prior to the disposal of it, and

§ You did not use it to produce assessable income in any part of those twelve months when it was not your main residence.

Based on the facts presented, you property 'B' was your main residence from the date of purchase.

As you will dispose of the property 'A' within six months or less of acquiring property 'B', then property 'B' and property 'A' are exempt from CGT for the whole period between when you acquired property 'A' property 'B' is disposed of.

Note: The situation is different if it takes longer than six months to dispose of the property as both residences are only exempt for the last six months before you dispose of property 'A', Providing the conditions in subsection 118 -140(2) of the ITAA 1997 are satisfied in full. You will subsequently, only obtain a partial exemption when a CGT event occurs to property 'A'.