Taxation Determination

TD 95/9

Income tax: capital gains: if an election made for the purposes of subsection 160ZZQ(11) of the Income Tax Assessment Act 1936 covers more than one period of absence from a taxpayer's sole or principal residence (SPR), is the six year period referred to in subparagraph 160ZZQ(11)(d)(iii) available in relation to each period of absence?

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FOI status:

may be releasedFOI number: I 1016069

1. Yes. The six year period is measured in relation to a 'cessation time' (sub-subparagraph 160ZZQ(11)(d)(iii)(A)). If a dwelling ceases to be a taxpayer's SPR more than once during the period of its ownership, the maximum six year period of income-producing use can apply in relation to each period of absence. All periods of income-producing use during all absences are not aggregated to calculate the six year period.

2. However, in order to be able to exempt a further period or periods of income producing use (i.e. in addition to the six year maximum for the first absence) in relation to the dwelling, it must again become a taxpayer's SPR after each absence for there to be a new 'cessation time' to which subsection 160ZZQ(11) may relate (see paragraph 160ZZQ(11)(a)). Whether the dwelling again becomes the taxpayer's SPR will be a question of fact in each case. Reference should be made to Taxation Determination TD 51 for guidance on factors which may be relevant in deciding this issue.

3. If there are intermittent periods of income producing use during an absence, these periods are aggregated in calculating the six year period (subparagraph 160ZZQ(11)(d)(iii)).

Example 1

Gary works for the Department of Foreign Affairs and Trade and is posted overseas for a period of 4 years. While he is overseas, his post-CGT SPR is rented. On return to Australia, Gary resumes residence in the dwelling for a further period of 4 years. He is posted overseas for another period of 4 years. The dwelling is rented again during this absence. On return, Gary sells the dwelling and elects for the purposes of subsection 160ZZQ(11) for two periods of income-producing use totalling 8 years.

Subsection 160ZZQ(11) treats the dwelling as Gary's SPR during the two periods of absence. This is because the dwelling ceases to be Gary's SPR on two separate occasions and the periods of income-producing use have not exceeded six years in relation to each period of absence.

Example 2

Peta ceases to use her post-CGT dwelling as her SPR and rents it out for five years. She leaves it vacant for one year, rents it out for a further three years, then sells the dwelling.

As there has only been one 'cessation' of use of the property as a SPR, Peta can elect under subsection 160ZZQ(11A) only for the period that ends when the property has been used to produce income for 6 years. The exemption covers the first five years of rental use, the period the dwelling was vacant, and a further one year of rental use. For the remaining two year period of its use, exemption is not available.

Commissioner of Taxation
20/4/95

Previously issued as Draft TD 94/D99

References

ATO references:
NO CGT Cell PRE (CGTDET11); NAT 94/6256-2

Related Rulings/Determinations:

TD 51
TD 95/8

Subject References:
elections;
income producing use;
period of absence;
principle residence

Legislative References:
ITAA 160ZZQ(11);
ITAA 160ZZQ(11)(a)
ITAA 160ZZQ(11)(d)(iii);
ITAA 160ZZQ(11)(d)(iii)(A)
ITAA 160ZZQ(11A);