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Edited version of your written advice
Authorisation Number: 1013140268254
Date of advice: 16 December 2016
Ruling
Subject: CGT - main residence exemption
Question 1
Are you entitled to claim the full main residence exemption on your property when it was rented out for a consecutive period of more than six years?
Answer
No.
This ruling applies for the following period:
Year ended 30 June 20X0
Year ended 30 June 201X
The scheme commences on:
1 July 200X
Relevant facts and circumstances
In 199X, you purchased your main residence.
You resided in the property until 199X when you were posted on an overseas deployment.
In 199X you resided in the property again, on return from deployment.
In 199X you were posted overseas again and you rented the property out.
You were then posted on multiple consecutive deployments, and did not return to your property until 200X. The property was rented during this period.
You resided in the property to 201X when you disposed of the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-110 and
Income Tax Assessment Act 1997 Section 118-145.
Reasons for decision
Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you can disregard any capital gain or loss realised on the disposal of a dwelling that was your main residence for your entire ownership period.
A capital gain or loss may only be partially disregarded if the dwelling was
● not your main residence throughout your entire ownership period, or
● used for the purpose of producing assessable income.
Absence rule
Section 118-145 of the ITAA 1997 provides that if a dwelling that was your main residence ceases to be your main residence, you can choose to treat that dwelling as your main residence for capital gains tax purposes, if:
● the dwelling is not used to produce income it can be treated as your main residence indefinitely,
● 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 that purpose, is six years.
If you make this choice, you cannot treat any other dwelling as your main residence while you apply this section.
In your case, the dwelling was rented for a consecutive period of more than six years while you were on overseas deployment
You are not eligible to apply section 118-145 of the ITAA 1997 in your circumstances; therefore you will not be entitled to apply the full main residence exemption on disposal of the property.