Edited version of your private ruling

Authorisation Number: 1012137717414

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Ruling

Subject: CGT- Main residence exemption

Questions and answers:

Are you entitled to disregard any capital gain made on the sale of your dwelling?

Yes

This ruling applies for the following period:

Year ended 30 June 2xxx

The scheme commences on:

1 July 2xxx

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 purchased a dwelling after 19 September 1985.

You lived in the dwelling from xxx until xxx.

You rented out the dwelling for less than 6 years.

You did not own any other property during the time your dwelling was being rented out.

From xxx until xxx the dwelling was being repaired due to damage.

You sold the dwelling on xxx.

You did not use the dwelling for any income producing purposes whilst you lived there.

The land that the dwelling is situated on and adjacent to is less than 2 hectares.

Relevant legislative provisions

Section 102-20 of the Income Tax Assessment Act 1997

Section 118-110(1)(b) of the Income Tax Assessment Act 1997

Section 118-190 of the Income Tax Assessment Act 1997

Section 118-145 (4) of the Income Tax Assessment Act 1997

Section 118-120(2) of the Income Tax Assessment Act 1997

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.

Reasons for decision

Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or loss as a result of a capital gains tax (CGT) event. The most common event is CGT event A1 which happens when a person disposes of a CGT asset to someone else. CGT assets include real estate acquired on or after 20 September 1985.

Main residence exemption

Generally, you can disregard a capital gain or 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 residence must be your home for the whole period that you owned it (subsection 118-110(1)(b) of the ITAA 1997).

· You must not have used the dwelling to produce assessable income (subsection 118-190 of the ITAA 1997)

· The property must be less than 2 hectares (subsection 118-120(2) of the ITAA 1997).

Continuing main residence status after dwelling ceases to be your main residence (you no longer live there)

There are rules available which extend the main residence exemption. These rules include section 118-145(1) of the ITAA 1997 which allows you to choose to have a dwelling treated as your main residence even though you no longer live in it

You can only make this choice for a dwelling that you have first occupied as your main residence. If you use your residence to produce income, you can treat your dwelling as your main residence while you use it for that purpose for up to six years after you cease living in it.

If you make this choice, you cannot treat any other dwelling as your main residence for that period (section 118-145 (4) of the ITAA 1997).

Application to your circumstance

You purchased the property after 19 September 1985 and moved in straight away. The property is less than 2 hectares and whilst you lived in the property you did not use it for income producing purposes. Therefore you satisfy the basic criteria for the full main residence exemption.

You moved out and used the property for income producing purposes for less than 6 years. It was then sold in xxx after you carried out some repairs.

As you only owned this property at the time, you moved into the house as soon as you purchased it and then rented it out for a period of less than 6 years you are eligible for the full main residence exemption. Accordingly, you are entitled to disregard any capital gain made on the sale of your property.