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Edited version of your private ruling
Authorisation Number: 1012577073893
Ruling
Subject: Capital Gains Tax - Main Residence exemption
Question
Is the period six months prior to the sale of your existing main residence considered to be main residence days for capital gains purposes?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You jointly owned your former main residence (existing residence) which was then sold after 27 September 1987.
This existing residence was never rented.
You jointly purchased your new residence with a contract date of less than 2 years before you sold your main residence. This property was rented during the time you still owned your existing residence. This property became your main residence shortly after you sold your existing residence.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Section 118-140
Reasons for decision
Summary
The six month period prior to the sale of your existing main residence counts as main residence days for your new main residence for Capital Gains purposes.
An exemption to this rule applies to your existing main residence if it was used to produce assessable income for any part of the 12 months prior to its sale.
Detailed reasoning
Main Residence Exemption
This exemption is provided for in section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997). This section states that you are exempt from CGT if you dispose of a property and if that property was your main residence throughout your ownership of the property.
Moving from one main residence to another
A relevant subsection in your particular circumstance is 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 the shorter of;
a) 6 months ending when your ownership interest in your existing main residence ends; or
b) The period between the acquisition of the new ownership interest and the time when the ownership interest referred to in paragraph (a) ends.
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;
c) Your existing main residence was your main residence for a minimum of three months in the twelve months prior to the disposal of it, and
d) You did not use it to produce assessable income in any part of those twelve months when it was not your main residence.
Conclusion
In applying the conditions listed in 118-140(1) of the ITAA 1997 to your situation the six month main residence capital gains exemption will apply to the six month period leading up to and including the date of settlement of your existing residence.