ATO Interpretative Decision
ATO ID 2003/467 (Withdrawn)
Capital gains tax: main residence exemption - residence owned by family trust
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||This ATO ID is withdrawn.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).
||This document has changed over time. View its history.
Status of this decision: Decision withdrawn 21 July 2017.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Are individuals who own a dwelling in their capacity as trustees of a family trust, and who use the dwelling as their main residence, entitled to the main residence exemption under section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the dwelling?
No. As the individuals acquired the dwelling in their capacity as trustees, the condition in paragraph 118-110(1)(a) of the ITAA 1997 cannot be satisfied. Accordingly, the main residence exemption is not available.
Two individuals in their capacity as trustees of a family trust purchased a dwelling in the 2000-01 income year. The individuals and their family used the dwelling as their main residence.
Approximately two years later, the ownership of the dwelling was transferred from the two individuals in their trustee capacity to one of them in their personal capacity.
Reasons for Decision
Subsection 118-110(1) of the ITAA 1997 provides that a capital gain or capital loss made by an individual from a CGT event that happens in relation to a dwelling is disregarded if the dwelling was their main residence throughout their ownership period.
The requirement that the taxpayer be an individual is specified in paragraph 118-110(1)(a) of the ITAA 1997. Subsection 995-1(1) of the ITAA 1997 defines an individual to mean a natural person.
The ITAA 1997 recognises that a legal person can have a number of different capacities in which the person does things. In each of those capacities, the person is taken to be a different entity (subsection 960-100(3) of the ITAA 1997). The trustee of a trust is taken to be an entity consisting of the person who is the trustee at any given time (subsection 960-100(2) of the ITAA 1997).
However, if a provision of the ITAA 1997 refers to an entity of a particular kind, it refers to the entity in its capacity as that kind of entity, not to that entity in any other capacity (subsection 960-100(4) of the ITAA 1997). Therefore, the reference in paragraph 118-110(1)(a) of the ITAA 1997 to an individual is a reference to an individual acting in their personal capacity only. It does not include an individual in the capacity of a trustee.
Because the dwelling in this case was acquired by the two individuals in their capacity as trustees, the condition in paragraph 118-110(1)(a) of the ITAA 1997 cannot be satisfied. Therefore, the main residence exemption does not apply. Accordingly, any capital gain or capital loss made from the disposal of the dwelling by the individuals in their trustee capacity will not be disregarded.
The result is the same under the equivalent provision of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 160ZZQ(12) of the ITAA 1936 provides an exemption where a dwelling owned by a taxpayer, being a natural person other than a person in the capacity of a trustee, is disposed of and the dwelling was the taxpayer's main residence throughout the relevant period.
The main residence exemption provision in the ITAA 1936 specifically excludes individuals in a trustee capacity, whereas the equivalent provision in the ITAA 1997 relies upon the definition of 'entity' in subsection 995-1(1) to achieve the same result. It is considered that the relevant provisions in the ITAA 1936 and ITAA 1997 express the same ideas, although different forms of words are used. Section 1-3 of the ITAA 1997 provides that if the ITAA 1936 expressed an idea in a particular form of words and the ITAA 1997 appears to have expressed the same idea in a different form of words in order to use a clearer or simpler style, the ideas are not taken to be different just because different forms of words are used.
Accordingly, the main residence exemption is not available as the individuals acquired the dwelling in their capacity as trustees, the condition in paragraph 118-110(1)(a) of the ITAA 1997 cannot be satisfied.
Date of decision: 28 May 2003
|Year of income:||Year ended 30 June 2003|
Income Tax Assessment Act 1936
Income Tax Assessment Act 1997
Capital gains tax
CGT capital proceeds
CGT main residence exemption
Siebel/TDMS Reference Number: 3594190; 1-B0RD5AO
Business Line: Small Business/Individual Taxpayers
Date of publication: 20 June 2003
|ATO ID 2003/467 (Withdrawn) history