Edited version of your private ruling

Authorisation Number: 1012445510421

Subject: CGT and main residence exemption

Question

Are you entitled to the main residence exemption on your property?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2009

The scheme commences on:

1 July 2008

Relevant facts and circumstances

You purchased a property after 19 September 1985.

You spent a couple of nights every weekend at the property for the first couple of months you owned the property. You then spent a couple of nights every other weekend at the property.

You did not move all your belongings into the property.

You moved some furniture and tools into the property.

During the period of ownership your employment was located some distance drive away from your property.

As part of your employment you were supplied with a house close to your work for a small amount per week.

You lived at the employer provided property and went to your property on weekends.

Your partner stayed in your property while you lived in the employer provided property during the week.

Your partner stayed in your property on weekends and some week nights.

The property was not used for income producing purposes and you did not own any other property during your ownership period.

You used your employer provided property address on the electoral roll and on your licence.

You had a PO Box for your mail.

You sold your property approximately X years after purchasing it.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-135

Reasons for decision

Capital Gains tax

Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer makes a capital gain or loss as a result of a capital gains tax (CGT) event happening to a CGT asset. CGT assets include real estate acquired on or after 20 September 1985.

A taxpayer makes a capital gain if their capital proceeds from the sale of a CGT asset are greater than the cost base for the purchase of that asset, for example, if a taxpayer received more for an asset than they paid for it.  

A taxpayer makes a capital loss if their reduced cost base for the purchase of that asset is greater than the capital proceeds resulting from the sale of that asset.

Capital gains tax is not a separate tax, it forms part of a taxpayer's assessable income and is taxed at each taxpayer's marginal tax rate.

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, there are several conditions that need to be satisfied such as the dwelling being your main residence for the whole period you owned it, and it not being used to produce assessable income.

Whether a dwelling is a taxpayer's main 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 taxpayer's 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 taxpayer's address on the Electoral Roll

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

· the taxpayer's 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.

In your case:

· You only stayed at your property for a couple of nights for the first couple of months and then a couple of nights every other weekend until the property was sold.

· You did not move all your belongings into your property, but did move in some furniture and tools

· You did not have your mail going to your property as you had a post box.

· Your address on the Electoral Roll is the employer provided house address.

· You lived in the employer provided house as the rent was cheap and it was close to your employment and your property was some distance from your employment.

The Commissioner is not satisfied that there is sufficient evidence that the property was your main residence. Therefore you are not entitled to a main residence exemption on your property, and any capital gain realised on disposal of the property is assessable.