ATO Interpretative Decision
ATO ID 2006/189 (Withdrawn)
Capital gains tax: main residence - 3 month period - extension of actual period by absence rule
FOI status: may be released
Status of this decision: Decision withdrawn 21 July 2017.
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Can a period in which a taxpayer chooses to treat a dwelling as his or her main residence under section 118-145 of the Income Tax Assessment Act 1997 (ITAA 1997) be taken into account in working out whether the dwelling continues to be the taxpayer's main residence for at least 3 months, under paragraph 118-150(3)(a) of the ITAA 1997?
Yes. A period in which a taxpayer chooses to treat a dwelling as his or her main residence under section 118-145 of the ITAA 1997 is taken into account in working out whether the dwelling continues to be the taxpayer's main residence for at least 3 months under paragraph 118-150(3)(a) of the ITAA 1997.
The taxpayer purchased land in late 2000 and commenced building a dwelling on the land in mid 2001.
In early 2002, as soon as practicable after construction of the dwelling was completed, the taxpayer moved into the dwelling.
The taxpayer resided in the dwelling for approximately 2 1/2 months.
Due to the lack of employment opportunities in the area in which the dwelling was situated, and other circumstances, the taxpayer moved interstate.
The dwelling was rented after the taxpayer moved out and is currently being rented.
The taxpayer intends to sell the dwelling. They do not own any other dwellings.
Reasons for Decision
The main residence exemption under Subdivision 118-B of the ITAA 1997 is generally available to a taxpayer if a dwelling is actually used or occupied as a main residence. However, in some circumstances, the exemption can be extended to the period before and/or after the dwelling actually becomes a taxpayer's main residence.
Section 118-150 of the ITAA 1997 deals with building, repairing or renovating a dwelling on land in which a taxpayer has an ownership interest. Under section 118-150, the taxpayer can choose to extend the main residence exemption for the dwelling to include the shorter period of:
- 4 years before the dwelling becomes the taxpayer's main residence; or
- the period starting from when the taxpayer acquired their ownership interest in the land and ending when the dwelling becomes their main residence.
However, the taxpayer can make this choice only if the dwelling:
- becomes their main residence as soon as practicable after the dwelling is built, repaired or renovated (paragraph 118-150(3)(a) of the ITAA 1997); and
- continues to be their main residence for at least 3 months (paragraph 118-150(3)(b) of the ITAA 1997).
For the purposes 118-150(3)(b) of the ITAA 1997, once main residence has been established, there are two ways in which it can continue. Firstly, it continues for as long as the owner actually maintains the dwelling as his or her main residence. Secondly, where the owner chooses, it continues for a further period after actual residence ceases (section 118-145 of the ITAA 1997). Both of these periods are taken into account in determining whether the 3 month requirement in paragraph 118-150(3)(b) is satisfied.
In the present case, the dwelling was the taxpayer's actual main residence for a period of less than the 3 months. However, this period was immediately succeeded by a period in which the taxpayer treated the dwelling as her main residence under section 118-145. For the purposes of paragraph 118-150(3)(b) of the ITAA 1997, the latter period extended the time in which the dwelling continued to be the taxpayer's main residence to the requisite period of at least 3 months.
Date of decision: 4 May 2006
|Year of income:||Year ended 30 June 2006|
Income Tax Assessment Act 1997
Capital gains tax
Main residence exemption
Siebel/TDMS Reference Number: 4917058; 1-B0RLBEG
Business Line: Small Business/Individual Taxpayers
Date of publication: 4 August 2006
|ATO ID 2006/189 (Withdrawn) history