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Edited version of private advice
Authorisation Number: 1051874567402
Date of advice: 26 July 2021
Ruling
Subject: CGT - main residence exemption - right to occupy
Question
Are you entitled to either a full or partial main residence exemption on the disposal of the share, if you are an Australian resident for taxation purposes at the time of disposal?
Answer
Yes, a full or partial main residence exemption will apply depending on whether you choose to apply the "absence rule" and how long your former main residence was rented out for.
In this case the share gives the holder the right to occupy the dwelling. Therefore, as a co-owner of the share, under section 118-130 of the Income Tax Assessment Act 1997 (ITAA 1997) you have an ownership interest in the dwelling owned by the company that you used as your main residence. Consequently, a full or partial main residence exemption will apply to any capital gain or loss made on the sale of the share under section 118-110 or section 118-185 of the ITAA 1997, respectively, if you are an Australian resident for taxation purposes at the time of disposal. Note that generally, foreign residents are no longer entitled to claim the main residence exemption.
As you moved out of your former main residence, you will not be entitled to a full main residence exemption on the disposal of your ownership interest (being your 50% ownership portion of the share) unless you choose to use the "absence rule" provided by section 118-145 of the ITAA 1997. Note that where a dwelling is used for income producing purposes after you move out, the "absence rule" can only be used for a maximum of 6 years. Also, for the period you choose the "absence rule", you cannot treat any other dwelling as your main residence for capital gains tax purposes.
This ruling applies for the following periods:
Year ending 30 June 2022
Year ending 30 June 2023
The scheme commences on:
1 July 2021
Relevant facts and circumstances
You and your spouse co-own a share in a company that provides the holder with the right to occupy a dwelling.
Since acquiring the share, the dwelling was used as your main residence prior to moving interstate.
The property has been rented since XX/XX/20XX.
You and your spouse are currently Australian residents for taxation purposes.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-110
Income Tax Assessment Act 1997 section 118-130
Income Tax Assessment Act 1997 section 118-145