Income tax: capital gains: does the principal residence exemption apply to the amount received for the granting of an easement or profits a prendre over land adjacent to a dwelling?
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FOI status:may be releasedFOI number: I 1216765
|This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).|
1. No. Proceeds from the granting of easements and profits a prendre are considered to be assessable capital gains, even if the underlying asset was acquired before 20 September 1985. Income Tax Ruling IT 2561 states the Commissioner's current policy in respect of easements and profits a prendre. They are not a part disposal of the land, but are the creation of new interests in the land. This policy applies from 21 September 1989, being the date of that ruling.
2. Prior to 21 September 1989, the granting of an easement or profit a prendre was considered to be a part disposal of the underlying property. Subsection 160ZZQ(4) of the Income Tax Assessment Act 1936, states that the principal residence exemption does not apply to land adjacent to a sole or principal residence if it is disposed of separately from the residence. Therefore, proceeds from the granting of easements or profits a prendre over land adjacent to a dwelling may be subject to capital gains tax if granted on or after 20 September 1985 over land which was also acquired after that date.
Commissioner of Taxation
Previously issued as Draft TD 93/D263
NO NEW TD34 (CGTDET70)
principal residence exemption
profits a prendre
capital gains tax