Edited version of private advice

Authorisation Number: 1052135310802

Date of advice: 6 July 2023

Ruling

Subject: CGT main residence

Question

Are you entitled to the full main residence exemption in section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) on the sale of 'the Property'?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX.

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect, and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You entered into a contract to purchase the Property off the plan in March 20XX. The expected settlement date at the time of purchase was December 20XX.

The Property was built on less than 2 hectares of land.

The Property was not handed over to you until October the next year.

You obtained contents insurance for the Property using the address of the property as the correspondence address.

You had electricity and gas connected.

You changed the postal address for your car insurance policy to the Property.

After obtaining access, you discovered numerous building defects, which you advised the building company of. The Property was uninhabitable at that time.

The bedroom repairs were completed by late January 20XX.

The building company you had engaged subsequently went into liquidation.

You did not own any other Property during the period of ownership.

No rental income was ever derived from the Property.

You never resided in the Property.

You sold the Property in March of 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-B

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-135

Reasons for decision

Subdivision 118-B of the ITAA 1997 provides an exemption for a capital gain or loss from certain CGT events that happen in relation to a taxpayer's main residence. Section 118-110 of the ITAA 1997 provides that a capital gain or loss you make from a CGT event, that happens in relation to your dwelling or your ownership interest in it, is disregarded if you are an individual and the dwelling was your main residence throughout your ownership period.

Whether a dwelling is a taxpayer's main residence depends upon the facts of each case. Under section 118-115 of the ITAA 1997, a dwelling is generally considered to be your main residence if:

•         You and your family live in it.

•         Your personal belongings are in it.

•         It is the address your mail is delivered to.

•         It is your address on the electoral roll.

•         Services such as gas and power are connected.

The length of time you stay in the dwelling and whether you intend to occupy it as your home may also be relevant.

In Couch & Anor v Federal Commissioner of Taxation [2009] AATA 41 at paragraph 14, the Tribunal confirmed that the 'mere intention to occupy a dwelling as a sole or principal residence, but without actually doing so, is insufficient to obtain the exemption.'

Application to your circumstances

It is accepted that you intended for the Property to be your main residence once it was made habitable, however, the mere intention to reside in the Property does not satisfy the provisions under section 118-110 of the ITAA 1997. As you never resided in the Property, you cannot treat the Property as your main residence under section 118-110 of the ITAA 1997.

Therefore, the Commissioner does not have any discretion to apply the main residence exemption to you to disregard the capital gain or loss you made when you disposed of the Property.