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Edited version of your written advice
Authorisation Number: 1012666678875
Ruling
Subject: Main residence - Absence Rule
Question 1
Can you choose to continue to treat the Property A as your main residence for the duration of your ownership?
Answer
Yes
This ruling applies for the following periods:
30 June 2015
30 June 2014
30 June 2013
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You and your spouse purchased a property (Property A) as your main residence.
You moved into the property as soon as practicable.
You purchased another property in 20XX and moved out of Property A and into Property B.
You rented out Property A from July 20XX.
You sold Property A.
The settlement date is in 20YY.
You are not treating any other property as your main residence until after settlement on the Property A occurs.
The land in which the Property A is situated is less than 2 hectares.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Section 118-185
Income Tax Assessment Act 1997 Section 118-145
Reasons for decision
Capital Gains Tax
Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you make a capital gain or a capital loss if and only if a capital gains tax (CGT) event happens to a CGT asset.
According to section 104-10 of the ITAA 1997, CGT event A1 will happen when you dispose of the CGT asset to someone else. Property is a CGT asset.
Main Residence Exemption
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 get a full exemption from CGT, you must satisfy the following conditions:
• the dwelling must have been your home for the whole ownership period;
• the dwelling must not have been used to produce assessable income; and
• any land on which the dwelling is situated must be two hectares or less.
Section 118-185 of the ITAA 1997 states, however, that if the dwelling was not your main residence for the entire ownership period, you will be entitled to a partial exemption from capital gains tax.
Continuing main residence status during absence
In some cases, you can choose to treat a dwelling as your main residence even though you no longer live in it.
Section 118-145 of the ITAA 1997 provides that you can continue to treat a dwelling as your main residence during periods of absence.
If the dwelling is not used to produce income, it can be treated as your main residence indefinitely.
Subsection 118-145(2) states that if the dwelling is used to produce income, the maximum period that you can choose to treat it as your main residence, while you use it for the purpose of producing income, is six years.
You are entitled to another maximum period of six years each time the dwelling again becomes, and then ceases to be, your main residence. There is no discretion to extend the six year period.
Under subsection 118-145(4), it is important to note that if you make the choice to treat that dwelling as your main residence, you cannot treat any other dwelling as your main residence while you apply this section, except if section 118-140 of the ITAA 1997 (changing main residence) applies.
In your case, Property A was your main residence and has been used to produce assessable income for less than six years. Therefore you can elect to treat the Property A as your main residence for the duration of your ownership. As such any capital gains or loss will be disregarded.