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Edited version of private advice
Authorisation Number: 1052184591100
Date of advice: 26 October 2023
Ruling
Subject: CGT - main residence exemption
Question
Do you meet the requirements for a full main residence exemption on disposal of the property?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
Person A (you) and Person B (your spouse) are Australian residents for tax purposes.
You purchased a property in Country B (the Property) many years ago and commenced occupation several days later.
After several years, you left the Property and moved to Australia.
You recently sold the Property.
The Property has never been used to earn assessable income.
You do not have an ownership interest in any other properties within Australia or overseas.
Assumptions
You will choose to continue to treat the Property as your main residence after you ceased to reside there.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-110
Income Tax Assessment Act 1997 section 118-145
Income Tax Assessment Act 1997 division 855-45
Reasons for decision
Summary
You meet the requirements for a full main residence exemption on disposal of the Property.
Detailed reasoning
When you become an Australian resident there are rules relevant to each capital gains tax (CGT) asset that you owned just before you became an Australian resident, except an asset that is taxable Australian property or that you acquired prior to 20 September 19XX.
Division 855-45 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you acquire a property for CGT purposes for the market value on the date you become an Australian resident for taxation purposes.
Section 118-110 of the ITAA 1997 provides that you can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling that is your main residence.
To be eligible for a full main residence exemption, the dwelling must have been your main residence for the whole period you owned it and must not have been used to produce assessable income.
At the time of disposal of the dwelling, you must not be an excluded foreign resident or a foreign resident who does not satisfy the life events test.
Section 118-145 of the ITAA 1997 provides that if a dwelling ceases to be your main residence, you may choose to continue to treat it as your main residence.
If you do not use the dwelling for the purpose of producing assessable income, you can treat it as your main residence indefinitely.
Application to your circumstances
You acquired a property (the Property) in Country B in 20XX. You resided in the Property from the time you acquired it for several years. At that time you moved to Country A. You have never used the Property to earn assessable income and you do not have an ownership interest in any other properties.
As the Property has not been used to produce assessable income, you can nominate it as your main residence for an indefinite period. By continuing to nominate the property as your main residence after you moved out, you will meet the requirements for a full main residence exemption on disposal of the Property.