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Edited version of your written advice
Authorisation Number: 1012799608267
Ruling
Subject: CGT - main residence exemption
Questions and Answers
1. Can spouses nominate two different dwellings as their main residence over the same period of time?
Yes
2. If they nominate two different dwellings and these dwellings are sold can they claim the full main residency exemption for both properties and therefore be exempt from paying any capital gains tax on these properties?
No.
This ruling applies for the following period:
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commences on:
1 July 2014
Relevant facts and circumstances
You and your spouse were married in 200X and are still married.
You purchased a property in 200X.
You have lived in the property from the day you owned it.
Your spouse owns an apartment which they purchased in 200Y.
Your spouse has lived in the apartment from the date they owned it.
Your spouse lives in the apartment during the working week.
You are on the electoral role in the area of your property and your spouse is on the electoral roll in the area of their property.
The official mailing address for you and your spouse is the property each of you own.
You child from a previous relationship lives with you in your property.
Your spouse's children from a previous relationship live with them in their property.
You and your spouse are considering selling both properties in question.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 103-25
Income Tax Assessment Act 1997 subdivision 115-A
Income Tax Assessment Act 1997 section 118-110
Income Tax Assessment Act 1997 section 118-170
Income Tax Assessment Act 1997 subsection 995-1(1)
Reasons for decision
Main residence exemption
As a general rule, an individual taxpayer can disregard any capital gain or loss realised on the disposal of their main residence (section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997)). The conditions which must be satisfied for the exemption are:
• the taxpayer is an individual,
• the dwelling was the main residence of the taxpayer throughout the ownership period,
• the interest did not pass to the taxpayer as a beneficiary or the trustee of the estate of a deceased person.
To obtain the full exemption from capital gains tax:
• the dwelling must have been the taxpayers home for the whole of the ownership period,
• the dwelling must not have been used to produce assessable income,
• any land on which the dwelling is situated must be two hectares or less.
Spouse having different main residence
'Spouse' is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 to include a person who, although not legally married to a person, lives with the person on a genuine domestic basis as the person's husband or wife.
If, during a period, a dwelling is your main residence and another dwelling is the main residence of your spouse (except a spouse living permanently separately and apart from you), you and your spouse must either:
• choose one of the dwellings as the main residence of both of you for the period; or
• nominate the different dwellings as your main residences for the period.
If you make the choice to nominate separate dwellings as your main residences and your ownership interest in that dwelling is greater than 50% you will only be entitled to a maximum 50% main residence exemption for the period that you are maintaining separate main residences.
There is nothing to prevent either spouse from nominating the other's dwelling as their main residence even though they do not have an ownership interest in that dwelling.
Making a choice
A main residence choice must be made:
• by the day you lodge your income tax return for the income year in which the relevant CGT event happened, or
• within a further time allowed by the Commissioner.
Applying the law to your circumstances
You have 100% ownership interest in your dwelling.
Your spouse has 100% ownership interest in their dwelling.
You will need to determine at what point you became 'spouses'. This may be prior to your marriage.
From the period that you had a spouse, you will only be entitled to a 50% partial main residence exemption on each of the dwellings if you and your spouse choose different homes as your main residence. If you both choose the same dwelling as your main residence a full exemption will be available for that dwelling only, no other main residence exemption will be available.
As both the dwellings have been owned for more than 12 months, you may be eligible to apply the discount capital gains provisions in subdivision 115-A of the ITAA 1997.