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Ruling

Subject: Capital gains tax - main residence exemption

Question and answer

Are you entitled to the full main residence exemption on your property purchased in 1991 and lived in from 1994?

No.

This ruling applies for the following periods:

Year ending 30 June 2012

The scheme commenced on:

1 July 2011

Relevant facts and circumstances

You purchased a home in Australia a number of years ago.

You did not move into this property until a few years after the purchase due to working overseas.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 118-110

Income Tax Assessment Act 1997 Section 118-35

Reasons for decision

CGT - main residence

Section 118-110 of the ITAA 1997 provides that you can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling that is your main residence. To qualify for full exemption, the dwelling must have been your main residence for the whole period you owned it, the ownership period, and must not have been used to produce assessable income.

Whether a dwelling is a taxpayer's sole or principal residence is an issue which depends on the facts in each case. Some factors may include, but are not limited to: 

· the length of time the taxpayer has lived in the dwelling

· the place of residence of the taxpayers family

· whether the taxpayer has moved his or her personal belongings into the dwelling

· the address to which the taxpayer has his or her mail delivered

· the taxpayers address on the Electoral Roll

· the connection of services such as telephone, gas and electricity

· the taxpayers intention in occupying the dwelling

A mere intention to occupy a dwelling as your main residence without actually doing so is not sufficient to get the exemption.

Moving into the dwelling

To establish a dwelling as a main residence you must move in as soon as practicable. The term as soon as practicable is used in section 118-135 of the ITAA 1997 to provide some leeway from what would otherwise be a strict requirement that the full exemption would only be available if the property became your main residence on the date you acquired it (that is, you would have to physically move in on that day).

In your case you purchased the property with tenants a number of years ago. You did not move into the property until a few years later due to work commitments overseas.

You rented the property out.

The reasons for the delay in establishing the property as your main residence are not adequate. Although it was your intention to move into the property you did not do this due to your work. The fact that you rented the property out further supports the fact that you did not establish the property as your main residence when it was first practicable to do so.

While we appreciate your circumstances, and understand that you may have intended to move into the dwelling as soon as practicable after the purchase of the property, you did not move into the property a number of years after you purchased it.

Therefore, it cannot be viewed that you have moved into the dwelling as soon as practicable.

You are not entitled to a full main residence on your property purchased in 1991.