ATO Interpretative Decision
ATO ID 2003/214 (Withdrawn)
Capital gains tax: main residence exemption - accidental destruction of dwelling - sale of vacant land
FOI status: may be released
Status of this decision: Decision withdrawn 5 May 2017.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
If you make a choice under subsection 118-160(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to claim the main residence exemption in respect of the sale of vacant land is the exemption only available for the period from the time the dwelling on the land was accidentally destroyed until your ownership interest in the land ends?
No. If you make the choice under subsection 118-160(2) of the ITAA 1997 a full exemption may be available depending upon your particular circumstances.
An individual acquired a dwelling on land of less than two hectares after 19 September 1985.
The dwelling was used as their main residence throughout the time that it was owned. The land was used solely for private or domestic purposes in association with the dwelling.
The dwelling was destroyed in a cyclone.
The vacant land was sold. The land was not used for income producing purposes at any time after the dwelling was destroyed.
No other dwelling was treated as the person's main residence at any time when the property was owned.
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 (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 (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).
Subsection 118-160(2) of the ITAA 1997 provides that you can choose to apply the main residence exemption to land 'as if, from the time of destruction until your ownership interest in the land ends, the dwelling had not been destroyed and were your main residence.'
The provision does not confer an exemption merely for the period after the destruction of the dwelling. The effect of making a choice under subsection 118-160(2) of the ITAA 1997 is that the dwelling is taken to continue in existence as your main residence from the time when it was destroyed until your ownership of the land ends.
Therefore, an exemption for the land will be available under section 118-160 of the ITAA 1997 to the extent that it was used for private or domestic purposes in association with the dwelling. In this regard, if the land is not used for income producing purposes after the dwelling was destroyed it will be taken to be used for private purposes in association with the notional dwelling during that time.
Where the land was used solely for private purposes in association with the dwelling and does not exceed two hectares a full exemption may be available.
|Date of amendment
|26 February 2016
||Reasons for Decision
||Amended for clarity and to reflect changes in the relevant legislation.
||Included reference to Subdivision 118-B and section 118-245 of the ITAA 1997.
Date of decision: 20 March 2003
|Year of income:||Year ended 30 June 2003|
Income Tax Assessment Act 1997
Related ATO Interpretative Decisions
ATO ID 2003/212
ATO ID 2003/213
Siebel/TDMS reference number: 3510797; 1-7NEI4LU; 1-B0LNENS
Business line: Small Business/Individual Taxpayers
Date of publication: 4 April 2003
|ATO ID 2003/214 (Withdrawn) history