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Edited version of your written advice
Authorisation Number: 1051194112027
Date of advice: 21 March 2017
Ruling
Subject: CGT - Main residence exemption
Question 1
Are you eligible to apply the main residence exemption for the period of 20XX to 20XX in relation to the property?
Answer
Yes.
This ruling applies for the following period(s)
Year Ending 30 June 2018
The scheme commences on
1 July 2012
Relevant facts and circumstances
You contracted to purchase a dwelling (Property A), which settled in 20XX, which you then moved into.
In 20XX you contracted to purchase a dwelling, which settled in 20XX.
You moved parts of your personal household and personal possessions to Property B in 20XX.
The gas and electricity accounts were registered under the Vendor’s name whilst you lived there in 20XX.
Your mailing address remained as Property A during 20XX.
You were unable to sell the Property A. As a result of this, you decided to lease out Property B and engaged a different agent to try and sell Property A urgently.
You moved back to Property A in 20XX.
Property B commenced producing assessable income in 20XX.In 20XX you contracted to sell Property A, which settled in 20XX.
You moved overseas to live in 20XX.
Your personal possessions were stored at a place that was not the Property B whilst you were overseas.
You moved back to Australia in 20XX and moved back in to Property B in 20XX.
You did not own another property while you lived overseas.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 118B
Income Tax Assessment Act 1997 Section 118-100
Income Tax Assessment Act 1997 Section 118-135
Income Tax Assessment Act 1997 Section 118-140
Income Tax Assessment Act 1997 Section 118-145
Reasons for decision
When a dwelling becomes your main residence
Subdivision 118B of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or capital loss you make from a capital gains tax (CGT) event that happens to a dwelling that is your main residence, can be ignored. Section 118-100 of the ITAA 1997 provides that this exemption does not apply in full if:
- It was your main residence during part only of your ownership period; or
- It was used for the purpose of producing assessable income.
In your circumstances, you purchased Property B, which settled in 20XX (the date at which you gained the ownership interest). You moved in to Property B in 20XX and treated it as your main residence for the period 20XX to 20XX. You leased Property B from 20XX to 20XX and moved back in 20XX.
Absence rule
Section 118-145 of the ITAA1997 provides that if a dwelling was your main residence, you may continue to treat it as your main residence. If you use your main residence to produce assessable income, the maximum that you can treat it as your main residence is six years. The six years will restart if you have moved back into the dwelling and then moved back out again. If you make the choice to treat the dwelling as your main residence whilst you are absent, you may not treat any other dwellings as your main residence whilst you choose to use the absence exemption in section 118-145 of the ITAA 1997.
Although you ceased to occupy Property B in 20XX, you can make a choice under section 118-145 of the ITAA 1997 to continue to treat Property B as your main residence after you moved out. As Property B was used to produce assessable income, the maximum period that you can make this choice for is six years. Property B was leased from 20XX to 20XX, a period of less than the six year maximum allowable. Therefore you may elect to treat Property B as your main residence during your absence.