ATO Interpretative Decision
ATO ID 2001/744 (Withdrawn)
Income tax: Capital gains tax: moving into a dwelling
FOI status: may be released
||This ATO ID is withdrawn. The ATO view expressed in this ATO ID is still current. Guidance on the view contained in this ATO ID can be found in Moving in (QC 52187).
||This document has changed over time. View its history.
Status of this decision: Decision withdrawn 6 October 2017.
|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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Does section 118-135 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to treat the dwelling as the taxpayer's main residence when they were unable to
obtain physical possession of the dwelling?
No, it is considered that the taxpayer did not move into the dwelling 'when it was first practicable to do so' within the meaning of section 118-135 of the ITAA 1997.
Therefore, the taxpayer is only entitled to a partial exemption for any capital gain or capital loss made on the disposal of the dwelling.
The taxpayer acquired a dwelling after 19 September 1985, which was occupied by a 'protected tenant'.
Two years after the taxpayer acquired the dwelling, the taxpayer sought to obtain possession through court proceedings.
After three years, the taxpayer was successful in obtaining possession of the dwelling.
The dwelling became the main residence of the taxpayer.
The dwelling was disposed of in June 2001 and the taxpayer wishes to claim the main residence exemption for the entire period of ownership including the period when the
dwelling was occupied by the protected tenant.
Reasons for Decision
Section 118-135 of the ITAA 1997 applies to assessments for the 1998-99 income year and later income years (section 102-1 of the Income Tax (Transitional Provisions)
Act 1997 ). As the dwelling was disposed of in June 2001, section 118-135 of the ITAA 1997 may apply to the present case, even though the dwelling was acquired prior to the
commencement of the 1998-99 income year.
Section 118-135 of the ITAA 1997 extends the main residence exemption to take account of the time needed to move into a dwelling. It includes the period from when the
taxpayer acquired the main residence to when it was first practicable to move into the dwelling after it was acquired. However, the Explanatory Memorandum to the Tax Law
Improvement Bill (No. 1) 1998 (the Explanatory Memorandum) explains that section 118-135 is not extended to the situation where the individual is unable to move into the
dwelling because it is being rented out.
In the present case, the taxpayer purchased the dwelling with a 'protected tenant.' The fact that the tenant could not be removed until five years later is not sufficient
for them to take advantage of the extension of time granted under section 118-135 of the ITAA 1997. Based on the Explanatory Memorandum, it is considered that the taxpayer did
not occupy the dwelling 'when it was first practicable to do so' within section 118-135 of the ITAA 1997. The fact that they did not attempt to remove the tenant for two years
supports this view.
The taxpayer will need to apportion any capital gain made on the disposal of the dwelling in accordance with subsection 118-185(2) of the ITAA 1997: No exemption is
available prior to the taxpayer occupying the dwelling as their main residence.
|Date of amendment
|6 December 2013
||Reasons for Decision, Other References, Keywords
||Amended for clarity
Date of decision: 22 October 2001
|Year of income:||Year ended 30 June 2001|
Income Tax Assessment Act 1997
Income Tax (Transitional Provisions) Act 1997
Explanatory Memorandum to the Tax Law Improvement Bill (No.1) 1998
CGT main residence exemption
Siebel/TDMS Reference Number: DW279101
Business Line: Small Business/Individual Taxpayers
Date of publication: 30 November 2001