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Edited version of your private ruling
Authorisation Number: 1012071426001
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Ruling
Subject: Capital gains tax - disposal of main residence
Question: Is the capital gain or capital loss made on the disposal of your main residence disregarded?
Answer: Yes
This ruling applies for the following period
Year ended 30 June 2009
The scheme commenced on
1 July 2008
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You and your spouse acquired a property (the property) in early 19XX.
You and your spouse established the property as your main residence.
In early 20XX, your spouse died.
In early 2009, you entered into a contract for the disposal of the property.
You continued to reside at the property until you moved into a unit at a nursing home in early 2009.
In the agreement that you entered into with the nursing home there were a number of conditions that had to be met before you could obtain a right to occupy the unit, such as:
§ the property had to be disposed of within a specified period of moving into the lodge
§ a bond was required to be paid to a specified company
§ that there were sufficient funds in your bank account to cover your private medical benefits and incidentals
§ a specified percentage of your pension went to the lodge for your care, and
§ you had to supply specialised furniture stipulated by the lodge.
You elected to continue to treat the property as your main residence after you vacated it.
In mid 2009, settlement occurred.
You have provided a copy of the following documentation to support your application and these documents are to be read with and forms part of your application for the purpose of this ruling:
§ Residential Sales Agency Agreement Schedule
§ Correspondence from your conveyancer dated early 2009
§ the nursing home - Monthly Tax Invoice for Fees - for a specified period
§ Death Certificate - your spouse dated early 20XX, and
§ Schedule - the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Section 118-145
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
The most common capital gains tax (CGT) event, CGT event A1, occurs when you dispose of CGT asset, the time of the event is when you enter into the contract for the disposal or if there is no contract when the change of ownership occurs.
CGT event A1 occurred when you disposed of the property.
Main residence exemption
Generally, 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:
§ 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.
Continuing main residence status after dwelling ceases to be your main residence
In some cases, you can choose to continue to treat a dwelling as your main residence even though you no longer live in it.
If you make this choice, you cannot treat any other dwelling as your main residence while you apply this section.
If the dwelling is used to produce income the maximum period that you can choose to treat it as your main residence, while you use it for that purpose, is six years.
If you do not use the dwelling to produce income, you can treat it as your main residence for an unlimited period.
In your case, you are entitled to the full main residence exemption as the property has not been used to produce assessable income and you elected to continue to treat this dwelling as your main residence for your entire ownership period.
Therefore, any capital gain or capital loss made on the disposal of the property is disregarded.