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Edited version of private advice
Authorisation Number: 1012617949945
Subject: CGT - main residence - multiple units of accommodation - disposal
Question:
Does the main residence exemption apply to your X acre property which includes Y units of accommodation?
Answer:
No.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commenced on:
1 July 20AA
Relevant facts:
You and your spouse purchased a parcel of land in the 20ZZ income year.
The parcel of land consisted of a single dwelling which you used as your main residence.
You and your spouse and children resided in this dwelling.
A short time after moving in you determined that the house was not adequate to meet the needs of your family and you applied to your local council to extend the dwelling, however this was declined.
You also applied for permission to subdivide the block however the local council refused.
You were eventually granted permission to construct another dwelling on the land; however it was only to be built as a group dwelling.
The new dwelling was occupied by your eldest child and their partner.
The new dwelling shared the main dwelling's services.
After a period of time you constructed another group dwelling under the same arrangements as the first group dwelling.
The second group dwelling was occupied by one of your children and their partner and children.
The homes were connected by driveways and concrete pathways.
You and your spouse and family members shared meals together and contributed to the maintenance and shared the use of the facilities.
The group dwellings have not been used to produce assessable income.
You have a child who was involved in a car accident and who is confined to a wheel chair. Your child occupies one of the dwellings as it has been modified to suit their needs.
You and your family assist in providing care.
You and your spouse commenced a property development business as a partnership in 20AA.
You and your spouse elected to treat X acres of the land as trading stock of the partnership.
You have supplied a number of documents which forms part of this private ruling.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 102-5
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Section 118-115
Reasons for decision:
Taxation Determination TD 1999/69 considers the situation where more than one unit of accommodation can constitute a dwelling for the purposes of the main residence exemption.
TD 1999/69 states that whether two or more units of accommodation are used together as one place of residence, for the purposes of the term dwelling as defined in section 118-115 of the ITAA 1997, is a question of fact that depends on the particular circumstances of each case.
Factors that are relevant in considering each case include:
(a) whether the occupants sleep, eat and live in them
(b) the distance between and the proximity of the units of accommodation
(c) whether the units are connected
(d) whether the units are capable of being sold separately
(e) the extent to which the daily activities of the occupants in the units are integrated
(f) how the units are shared by the occupants, and
(g) how costs of the units are shared by the occupants.
In your situation, you own Y units of accommodation that have been used by your family as dwellings that are situated on one title. You and your family share some family meals and contribute to the maintenance of the properties.
However, the dwellings are separated by considerable distance and have different street entrances, the occupants live independently and accordingly it is considered that the dwellings are not sufficiently integrated so as to be one unit of accommodation.
Note:
You are able to claim a main residence exemption for a dwelling and adjacent land that is used primarily for private or domestic purposes (including the land on which a building is situated). This exemption is limited to a maximum of 2 hectares.
Any land in excess of the 2 hectares is subject to the CGT provisions. You are able to select which part of the land is included with the dwelling.
If the selected area of land can be separately valued, you calculate your capital gain or capital loss on the remainder of your land by apportioning the capital proceeds and the cost base or reduced cost base (if applicable) on the basis of the valuation. If the selected area cannot be separately valued, the capital gain or capital loss may be calculated by apportioning the capital proceeds on an area basis.
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