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Edited version of private advice
Authorisation Number: 1051966542075
Date of advice: 5 April 2022
Ruling
Subject: Capital gains tax - main residence exemption
Question
Can you disregard any capital gain you made from the sale of the property?
Answer
Yes.
Based on the information provided to the Commissioner you can disregard any capital gain made on the sale of the property.
The absence rule under section 118-145 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a taxpayer to treat a property as their main residence for up to 6 years when rented out as long as they are choosing to treat no other dwelling as their main residence for the same period.
Section 126-5 of the ITAA 1997 provides that if an asset or an interest in an asset is transferred by a person to their spouse or former spouse as a result of the breakdown of their marriage or relationship, a roll-over applies provided certain conditions are met. These conditions include where the CGT event happened because of a court order under the Family Law Act 1975.
Where there is a marriage or relationship breakdown roll-over under Subdivision 126-A of the ITAA 1997, section 118-178 of the ITAA 1997 provides that you can apply the main residence provisions in Subdivision 118-B of the ITAA 1997 in the way they would apply if:
(a) your ownership interest had commenced when your former partner's ownership interest commenced (the acquisition time); and
(b) from the acquisition time until the time your former partner's ownership interest ended:
(i) you had used the dwelling in the same way that your former partner used it; and
(ii) the dwelling had been your main residence for the same number of days as it was your former partner's main residence.
Therefore, you are able to apply the absence rule in section 118-145 of the ITAA 1997 to your entire ownership interest in the property.
This ruling applies for the following period:
Year ended 30 June 2021
The scheme commences on:
1 July 2020
Relevant facts and circumstances
You and your then spouse moved into the property several years ago.
You both treated this property as your main residence.
This property was owned 50-50.
A number of years ago, you and your then spouse separated and moved out of the property.
The property was rented out.
In the following year, as per a court order made under the Family Law Act 1975, your former spouses' share of the property was transferred to you.
From that point in time, you were the sole owner of the property.
The property continued to be rented out.
A few years later the property was sold by you.
From the period you moved out in until the property was sold you did not treat any other property as your main residence.
You wish to use the 6 year absence rule to treat the property as your main residence when it was being rented out.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-110
Income Tax Assessment Act 1997 section 118-145
Income Tax Assessment Act 1997 section 118-178
Income Tax Assessment Act 1997 section 126-5
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