Edited version of private advice

Authorisation Number: 1052314260027

Date of advice: 8 October 2024

Ruling

Subject: CGT - main residence exemption

Question 1

Does Capital Gain Tax (CGT) event A1 occur on the disposal of the property?

Answer

Yes. A CGT event A1 occurs when you dispose of a CGT asset. In your case, you disposed of your property, so a CGT event A1 occurred.

Question 2

Did the CGT event A1 occur when the contract of sale of the property is entered into?

Answer

Yes. A CGT A1 occurs when you dispose a CGT asset. You dispose of a CGT asset if a change of ownership occurs from you to another entity. In your case, you entered into contract of sale of your property, you changed the ownership of the property from you to another entity, so the CGT event A1 occurred.

Question 3

Does the main residence exemption apply to the disposal of the property?

Answer

Yes. You are able to claim a partial exemption from CGT for your dwelling and up to 2 hectares of the land (including the area of the land immediately under the dwelling). The land that exceeds 2 hectares is subject to CGT as it is not covered by the main residence exemption.

Question 4

Does market value substitution rule apply to the sale?

Answer

Yes. You are taken to have acquired the dwelling or your ownership interest at the time it was first used to produce income for its market value at that time.

Question 5

Does the 6-year absence rule apply to the sale?

Answer

Yes. Because you used your dwelling that was your main residence for the purpose of producing assessable income, you can choose to treat it as your main residence while you use it for that purpose up to 6 years. The period that exceeds the 6-year limit is subject to CGT.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

XX 20XX

Relevant facts and circumstances

You purchased the vacant land after 20 September 1985.

The land is over than 2 hectares in size.

You intended to build a home and use it as your main residence.

XX 20XX, you married and moved into the shed and caravan located on the land.

XX 20XX, you applied for the planning permits required to construct the residence and the final permit was issued in XX 20XX.

In 20XX, the final certificate of occupancy was issued to your property (the property). You moved into the house and claimed it as your main residence immediately once liveable.

During the construction period, you and your spouse lived on the property using both the shed and caravan.

On XX 20XX, you moved to another state with your family and began renting out the property.

On XX 20XX, you and your spouse divorced. You retained custody of your children.

On XX 20XX, you moved back to the property with your children to use it as your main residence.

On XX 20XX, you entered into a contract to sell the property. The settlement date will be 48 months after the contract of sale date.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 118-115

Income Tax Assessment Act 1997 Subsection 118-120(3)

Income Tax Assessment Act 1997 Subsection 118-145(2)

Income Tax Assessment Act 1997 Section 118-190

Income Tax Assessment Act 1997 Subsection 118-192(2)