ATO Interpretative Decision

ATO ID 2003/213 (Withdrawn)

Income Tax

Capital gains tax: main residence - absences - accidental destruction of dwelling - sale of vacant land
FOI status: may be released

This ATO ID is withdrawn.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 Treating land as your main residence (QC 17187).

This document has changed over time. View its history.

CAUTION: 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.

Issue

Can section 118-160 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to exempt a sale of vacant land when a dwelling that you choose to treat as your main residence under section 118-145 of the ITAA 1997 is accidentally destroyed?

Decision

Yes. Section 118-160 of the ITAA 1997 (which allows you to claim the main residence exemption when vacant land is sold 'after a dwelling that is your main residence is accidentally destroyed') can apply if the dwelling was your main residence because of a choice you have made under section 118-145 of the ITAA 1997.

Facts

An individual acquires land and a dwelling after 19 September 1985

The dwelling is used as the individual's main residence until May 1996, when they move out.

The dwelling is then used as a rental property.

The dwelling is destroyed in a flood in August 2001.

The individual elects to continue to treat the dwelling as their main residence under section 118-145 of the ITAA 1997.

The vacant land is sold in February 2003.

Reasons for Decision

The main residence exemption in Subdivision 118-B of the ITAA 1997 applies to a capital gain or capital loss from a CGT event that happens to a dwelling that is your main residence (subsection 118-110(1) of the ITAA 1997).

The exemption extends to any capital gain or loss from land adjacent to a dwelling (to a maximum area of two hectares including the land immediately under the dwelling) if the land is used primarily for private or domestic purposes in association with the dwelling (section 118-120 of the ITAA 1997). However the exemption does not apply to land if separate CGT events happen to the land and the dwelling other than through a compulsory acquisition under section 118-245 of the ITAA 1997 (section 118-165 of the ITAA 1997).

The main residence exemption can be chosen for a CGT event that happens to vacant land where the CGT event happens to the vacant land after a dwelling that is your main residence is accidentally destroyed (section 118-160 of the ITAA 1997).

The requirement in subsection 118-160(1) of the ITAA 1997, that a dwelling that is your main residence is accidentally destroyed, can be satisfied where the dwelling that is destroyed is taken to be your main residence because you have made a choice under section 118-145 of the ITAA 1997.

Section 118-145 of the ITAA 1997 enables you to choose to continue to treat a dwelling as your main residence after it ceases to be so. If the dwelling is used for income producing purposes the choice has effect for six years. Each time the dwelling again becomes a main residence and then ceases to be so a new choice can be made.

Here a choice can be made under section 118-145 of the ITAA 1997 to treat the destroyed dwelling as the individual's main residence at the time it was destroyed because, at that time, it had been used for less than six years for income producing purposes.

Having made the choice under section 118-145 of the ITAA 1997 another choice can be made under section 118-160 of the ITAA 1997 to exempt any capital gain or loss arising from the sale of the vacant land.

Amendment History

Date of amendment	Part	Comment
26 February 2016	Reasons for Decision	Amended for clarity and to reflect changes in the relevant legislation.
	Legislative references	Included reference to Subdivision 118-B and section 118-245 of the ITAA 1997.

Date of decision: 19 March 2003

Year of income: Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   Subdivision 118-B
   subsection 118-110(1)
   section 118-120
   section 118-145
   section 118-160
   subsection 118-160(1)
   section 118-165
   section 118-245

Related ATO Interpretative Decisions
ATO ID 2003/212
ATO ID 2003/214

Business Line: Small Business/Individual Taxpayers

Date of publication: 4 April 2003

ISSN: 1445-2782

history

	Date:	Version:
	19 March 2003	Original statement
	26 February 2016	Updated statement
You are here	5 May 2017	Archived

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).