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Edited version of private advice
Authorisation Number: 1051978636446
Date of advice: 5 May 2022
Ruling
Subject: CGT - main residence exemption - joint tenants
Question 1
Will you have a capital gain or loss on disposal of your ownership interest in Property B?
Answer
Yes.
Question 2
Are you eligible for a full main residence exemption on the disposal of your ownership interest in Property A?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You purchased a property (Property A) with your adult child. You purchased the property as joint tenants.
You have resided in Property A since purchase and intend to sell the property in the near future.
The purchase of Property A was financed with a bank loan and any difference was contributed equally by you and your adult child.
You also purchased a property (Property B) with your adult child. You purchased this property as joint tenants.
Your adult child has resided in Property B since they purchased it and intends to sell the property in the near future.
The purchase of Property A was financed with a bank loan and any difference was contributed equally by you and your adult child.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 subsection 108-5(1)
Income Tax Assessment Act 1997 section 108-7
Income Tax Assessment Act 1997 subsection 118-110(1)
Reasons for decision
Question 1
Will you have a capital gain or loss on disposal of your 50% ownership interest in Property B?
Summary
Yes. As you jointly own Property B with your adult child, and have never resided at the property, you will be liable for 50% of any capital gain or loss incurred on disposal of Property B.
Detailed reasoning
For capital gains tax (CGT) purposes, individuals who own a CGT asset as joint tenants are treated as if each of them held that interest as tenants in common owning equal interests in the asset. Any capital gain or loss is shared in accordance with their ownership interests.
CGT event A1 happens when you dispose of a CGT asset. On disposal of Property B, you will dispose of a CGT asset, being a 50% interest in the property.
Therefore, you will be liable for any capital gain or loss incurred on disposal of Property B.
Question 2
Are you eligible for a full main residence exemption on the disposal of your 50% ownership interest in Property A?
Summary
Yes. You have met the requirements for a full main residence exemption on the disposal of your ownership interest in Property A.
Detailed reasoning
Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you can disregard a capital gain or capital loss made from a capital gains tax (CGT) event that happens to a dwelling that is your main residence.
As you have resided in Property A from the time your ownership interest commenced, you are eligible for a full main residence exemption on disposal of your 50% interest in Property A.