Edited version of private advice

Authorisation Number: 1051859028480

Date of advice: 30 June 2021

Ruling

Subject: CGT - main residence exemption

Question

Are you liable to pay Capital gains tax (CGT) upon the disposal of your ownership interest in your primary place of residence in country A?

Answer

No.

Taxation Determination TD 95/7 provides that a taxpayer can, in relation to an overseas dwelling that has ceased to be his or her main residence before becoming a resident of Australia, make a choice to treat the dwelling as having continued to be their main residence in their absence, subject some other requirements being satisfied.

Taxation Determination TD 95/7 also provides that although for Australian tax purposes certain assets are deemed to be acquired on a non-resident becoming an Australian resident taxpayer, this does not mean that the assets were not ownedby the taxpayer before the taxpayer became a resident. If the taxpayer owned a dwelling overseas and it ceased to be the taxpayer's main residence on the taxpayer becoming an Australian resident, the absence choice can be made.

Based on the facts provided you are entitled to make a choice that this section applies to treat your ownership interest in your primary place of residence in country A as continuing to be your main residence until disposal and you can claim a full CGT main residence exemption on your ownership interest in the property.

This ruling applies for the following period periods:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

In 20XX you sold your Australian property and moved to Country A with your family.

In 20XX you started full-time employment in Country A, and you were a resident of Country A for taxation purposes from that point onwards.

In October 20XX you purchased a property in Country A which you and your spouse lived in as your principle place of residence.

You have only ever held a 50% ownership interest in the Country A property.

Between 20XX and 20XX you renovated the Country A property whilst you and your spouse remained living in it as your principle place of residence.

In 20XX you were granted citizenship in Country A.

In mid- 20XX, after deciding to separate from your spouse, you moved back to Australia with two of your children.

Your other children remained living with your former spouse in Country A as part of your separation.

You stopped earning money in Country A and paying tax in Country A in mid-20XX.

You obtained full-time employment in Australia in mid-to-late 20XX, which is when you re-established your Australian tax residency.

Following you returning to Australia attempts were made to sell the Country A property, however you were unsuccessful.

The Country A property was rented on various occasions between you returning to Australia to live in 20XX and when the property was eventually sold in early-to-mid 20XX.

You have been renting a property in Australia since returning in mid- 20XX. As such you have not claimed a main residence exemption for any other property during the period you held the 50% ownership interest in the Country A property.

Your spouse did not hold any other property as their main residence during the period you held the 50% ownership interest in the Country A property.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 118-145

Income Tax Assessment Act 1997 Subsection 118-170(3)