Edited version of your private ruling

Authorisation Number: 1012578895391

Ruling

Subject: CGT - main residence - Non-resident - absence choice

Question 1:

Can you continue to treat the 'granny flat' as your main residence?

Answer:

Yes.

Question 2:

Did you make a capital loss $X on the sale of your overseas property?

Answer:

No.

Question 3:

Did you make a capital loss $Y on the sale of your overseas property?

Answer:

Yes.

Question 4:

Can you offset this capital loss against any future capital gains in Australia?

Answer:

Yes.

This ruling applies for the following period:

Year ended 30 June 2014

The scheme commenced on:

1 July 2013

Relevant facts

One of your children resides in Australia.

Your spouse purchased a property in Australia in mm/yyyy.

The property consisted of a main residence, in which your child and spouse resided and a separate 'granny flat' in which you resided whilst in Australia.

Your spouse passed away.

Pursuant to your late spouses will, title to the property was transferred to you and your child.

You and your late spouse also owned an apartment in another country. The apartment was purchased after 19 September 1985 for an amount plus stamp duty of an amount.

You were granted a permanent resident visa and arrived in Australia in the 19XX income year.

You are not making an absence choice in respect of the apartment

You regularly returned to the location of the overseas apartment.

Each time you ceased to be a resident you choose to disregard any capital loss or capital gain made on ceasing to be a resident.

You placed the overseas apartment on the market and moved into aged care facility in Country X in the 20XX income year.

You sold the property for an amount, agents commission was an amount and stamp duty of an amount. The proceeds from the sale were an amount. The exchange rate on this date was A.

The market value of the property on your arrival in Australia was an amount. The exchange rate on this date was B.

You have calculated that you have made a capital loss of $X as a result of the sale of the Country X apartment.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1997 Section 102-5

Income Tax Assessment Act 1997 Section 104-160

Income Tax Assessment Act 1997 Subsection 104-165(2)

Income Tax Assessment Act 1997 Section 118-130

Income Tax Assessment Act 1997 Section 118-145

Income Tax Assessment Act 1997 Section 855-45

Reasons for decision

Capital gains tax and non-residents

Non-residents are only subject to capital gains tax (CGT) when a CGT event happens to taxable Australian property. Taxable Australian property is defined as real property situated in Australia.

Ordinarily, a non-resident taxpayer who makes a capital gain on the sale of taxable Australian property would include the capital gain in assessable income. However, the main residence exemption may apply to disregard any CGT applicable on disposal of the property.

In some cases you can continue to treat a dwelling 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. By choosing to do this, you are making an absence choice.

If you make this choice you cannot treat any other dwelling as your main residence for that period.

In your situation, your Country X apartment is considered taxable Australian property. You are not making an absence choice in relation to the apartment and accordingly your capital loss will need to be included in your income tax return in the relevant income year.

You calculate your capital loss using the following calculations.

Cost base = C

Capital proceeds = D

Capital loss = $E