Edited version of your written advice

Authorisation Number: 1013082754753

Date of advice: 2 September 2016

Ruling

Subject: Capital gains tax

Question

Are you entitled to disregard any capital gains on the disposal of the property?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You and your spouse purchased a land and building package in 20XX (the property).

At the time your employment required you to be in Location A for a specified time.

Before the building was completed, your employment required you to relocate to Location B.

You intended to move into the property as soon as practical; due to employment requirements to relocate you did not move into the property.

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

Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or loss as a result of a CGT event. The most common event is CGT event A1 which happens when a person disposes of a CGT asset to someone else.

Section 118-110 of the ITAA 1997 establishes that you can disregard a capital gain or capital loss you make from a CGT event that happens to a dwelling that is your main residence.  

Section 118-135 of the ITAA 1997 directs that a dwelling becomes your main residence at the time it is first practicable for you to move into it after you acquired your ownership interest.

Whether a dwelling is a taxpayer's main residence is an issue which depends on the facts in each case. CGT Determination Number TD 51 discusses relevant factors to consider when determining if you have established a dwelling as your main residence.

Some relevant 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, and

• the taxpayer's intention in occupying the dwelling.

The relevance and weight to be given to each of these or other factors will depend upon the circumstances of each particular case.

A mere intention to occupy a dwelling as a main residence, but without actually doing so, is insufficient to obtain the exemption.

Once a dwelling has been established as your main residence, you may continue to treat that dwelling as your main residence during periods of absence. When the dwelling is left vacant you may continue to treat the dwelling as your main residence for an indefinite period.

Where the dwelling is rented, the maximum period that you may continue to treat the dwelling as your main residence is six years. You are entitled to another maximum period of six years each time the dwelling again becomes and ceases to be your main residence. The Commissioner does not have any discretion to extend the six year period.

Application to your circumstances

Whilst we appreciate your circumstances regarding being required to relocate due to your employment, the main residence exemption does not apply; as you have never occupied the dwelling, it has not been established as your main residence. The 6 year absence rule can only apply once a dwelling has been established as your main residence. Therefore you are not entitled to disregard any capital gains on the disposal of the property.