Income tax: capital gains: do the dwellings referred to in subsection 118-170(1) of the Income Tax Assessment Act 1997 have to be post-CGT assets?

No. Subsection 118-170(1) of the Income Tax Assessment Act 1997 (ITAA 1997) [1] does not require that the dwellings be post-CGT assets. The subsection merely requires that each spouse has a separate dwelling which is his or her main residence.

A husband and wife jointly own both a pre-CGT house (occupied by the wife) and a post-CGT house (occupied by the husband). The husband and wife can choose the post-CGT house as their main residence under paragraph 118-170(1)(a).

Note: in this case, the spouses are not living separately and apart on a permanent basis (subsection 118-170(1)).