ATO Interpretative Decision
ATO ID 2003/272 (Withdrawn)
Income Tax
CGT Main residence exemption: ownership interest - share in companyFOI status: may be released
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This ATO ID is withdrawn from the database as it is a straight application of the law and does not contain an intepretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Issue
Can the taxpayer, an individual who held a share in a company that gave the shareholder the right to live in a specific home unit, disregard the capital gain made from the sale of the share under subsection 118-110(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The taxpayer can disregard the capital gain made from the sale of the share under subsection 118-110(1) of the ITAA 1997.
Facts
The company was the legal owner of a block of land on which home units were constructed. The taxpayer and other family members each owned one share in the company. They owned all of the shares issued by this company. Each share provided the shareholder with the exclusive right to live in a specific home unit owned by the company.
The taxpayer lived in the home unit which their share entitled them to occupy from the date the share was acquired until the date of its disposal. The home unit was the taxpayer's main residence for this period. The taxpayer did not use all or any part of the home unit to derive income. The taxpayer sold the share which provided the right to live in the home unit to another person, and realised a capital gain upon disposal.
Reasons for Decision
An 'ownership interest' in land or a dwelling is defined in subsection 118-130(1) of the ITAA 1997. The definition includes, at subparagraph 118-130(1)(c)(iii):
a share in a company that owns a legal or equitable interest in the land on which the home unit is erected and that gives you a right to occupy it.
The taxpayer had an ownership interest in land or a dwelling because the share that they owned in the company gave them a right to occupy the home unit.
CGT event A1, section 104-10 of the ITAA 1997, happened when the taxpayer sold the share. The taxpayer made a capital gain as the capital proceeds from the disposal were more than the cost base of the share (subsection 104-10(4) of the ITAA 1997).
As the taxpayer had occupied the home unit solely as their main residence, and did not use all or any part of the home unit to produce income, the capital gain made from the CGT event A1 is disregarded under subsection 118-110(1) of the ITAA 1997.
Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
section 104-10
subsection 104-10(4)
section 118-110
subsection 118-130(1)
subparagraph 118-130(1)(c)(iii)
Keywords
Capital gains tax
Capital gains
CGT event A1-disposal of a CGT asset
CGT main residence exemption
Disposal of shares
Home units
Real estate ownership & interests
ISSN: 1445-2782
| Date: | Version: | |
| 1 April 2003 | Original statement | |
| You are here | 23 December 2011 | Archived |