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ATO Interpretative Decision

ATO ID 2010/101 (Withdrawn)

Income Tax
Capital Gains Tax: main residence exemption - interaction with non-resident provisions

Attention This ATO ID is withdrawn. Guidance on the basis of the decision in this ATO ID can be found in the Guide to capital gains tax (NAT 4151). Additional guidance can be found in Taxation Determination TD 95/7 Income tax: capital gains: does subsection 855-45(3) of the Income Tax Assessment Act 1997 prevent a taxpayer from making a choice that section 118-145 of that Act apply to an overseas dwelling that the taxpayer owned before becoming a resident of Australia? .
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 21 July 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


For the purposes of the main residence exemption in Subdivision 118-B of the Income Tax Assessment Act 1997 (ITAA 1997), does the ownership period of a dwelling in a foreign country, include the period that it was owned by a taxpayer prior to their becoming an Australian resident?


Yes. For the purposes of the main residence exemption, the ownership period of the dwelling commences at the time prescribed in section 118-130 of the ITAA 1997. This means, in the circumstances of this case, that the taxpayer was entitled to a partial main residence exemption under section 118-185 of the ITAA 1997.


The taxpayer, an individual, was a resident in a foreign country. They acquired a dwelling in that country in 2002 which they used as their main residence before coming to Australia. The dwelling was not taxable Australian property for the purposes of section 855-15 of the ITAA 1997.

The taxpayer became an Australian resident during the 2006-07 income year.

The taxpayer sold the dwelling during the 2007-08 income year.

Reasons for Decision

Broadly, if an individual owns land in a foreign country before they become an Australia resident, only capital gains or capital losses that accrue in respect of the land after they become a resident are subject to the provisions of Parts 3-1 and 3-3 of the ITAA 1997.

Under section 855-45 of the ITAA 1997, a taxpayer that becomes an Australian resident is taken to have acquired each CGT asset that they own just before becoming an Australian resident for its market value at the time of becoming an Australian resident, except for an asset:

 that is taxable Australian property as defined in section 855-15 of the ITAA 1997; or
 that was acquired before 20 September 1985.

In this case the taxpayer would make a capital gain if the capital proceeds from the sale of the dwelling exceeded the market value at the time they became a resident (assuming no other amounts had subsequently been included in the dwelling's cost base).

An issue arises as to whether the taxpayer is entitled to any main residence exemption for the capital gain, given that the dwelling was their main residence before they became an Australian resident. This depends on whether the acquisition rule in subsection 855-45(3) of the ITAA 1997 affects the calculation of the 'ownership period' referred to in Subdivision 118-B of the ITAA 1997.

In applying the main residence exemption, regard is had to a taxpayer's 'ownership period' of a dwelling and the number of days during that period that the dwelling was the taxpayer's main residence. A taxpayer has an ownership interest in land or a dwelling that they acquire under a contract from the time when they obtain legal ownership of it. Generally this happens when the contract is settled, unless the contract gives the taxpayer a right to occupy the dwelling at an earlier time. (subsection 118-130(2) of the ITAA 1997).

In this case, the taxpayer's ownership interest in the dwelling commenced in 2002. Section 118-130 of the ITAA 1997 is not modified in cases where a dwelling is taken to have been acquired at another time by a provision of the ITAA 1997.

If a dwelling is not a taxpayer's main residence for the entire ownership period, section 118-185 of the ITAA 1997 provides that a partial exemption is available. Provided all of the requirements in subsection 118-185(1) of the ITAA 1997 are satisfied, the taxpayer calculates their exemption using the formula in subsection 118-185(2) of the ITAA 1997.

Accordingly, the taxpayer, who after becoming a resident disposed of a dwelling that was their main residence before they became a resident, can claim a partial main residence exemption under section 118-185 of the ITAA 1997 as follows:

   Capital gain (calculated using MV acquisition cost) * (days in the ownership period that the dwelling was main residence \ total days in ownership period)

This view is consistent with that expressed in Taxation Determination TD 95/7. TD 95/7 provides that a taxpayer can make an election under the absence rule (now in section 118-145 of the ITAA 1997) for a dwelling that they owned before becoming a resident of Australia.

Date of decision: 21 April 2010

Year of income:Year ended 30 June 2008

Legislative references:
Income Tax Assessment Act 1997
   section 118-130
   subsection 118-130(2)
   section 118-145
   subsection 118-185(1)
   subsection 118-185(2)
   section 855-15
   section 855-45
   subsection 855-45(3)

Related Public Rulings (including Determinations)
Taxation Determination TD 95/7

ATO Interpretative Decisions overturned by this decision
ATO ID 2003/826

Capital gains tax
Capital gains
Capital losses
CGT main residence exemption
Dwelling ceases to be a main residence
Residence in Australia

Siebel/TDMS reference number: 6337624; 1-B0ROU9H

Business line: Small Business/Individual Taxpayers

Date of publication: 30 April 2010

ISSN: 1445-2782

ATO ID 2010/101 (Withdrawn) history   Top  
   Date   Version 
   21 April 2010   Original statement   
 You are here ®  21 July 2017   Withdrawn   


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