Taxation Determination

TD 92/129

Income tax: capital gains: if a person builds a principal residence straddling two post-CGT blocks acquired at different times, what is the 'relevant commencing date' for the purpose of subsection 160ZZQ(5AA) of the Income Tax Assessment Act (1936) ?

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FOI status:

1. The 'relevant commencing date' is the date the earlier block was acquired.

Example:

Block A was purchased 1 October 1985. Block B, the neighbouring block, was purchased 1 October 1990. On 1 January 1991 construction commenced on a dwelling which straddled both blocks. On 1 July 1991, the taxpayer moved into this dwelling as his or her sole or principal residence, and continued to reside there until 1 December 1991 when the dwelling was disposed of. At no time was the dwelling used for income-producing purposes.

If the taxpayer elects for subsection 160ZZQ(5) to apply, the 'relevant commencing date' for subsection 160ZZQ(5AA) is 1 October 1985. As the period from this date until the dwelling was completed is more than four years before the dwelling became the sole or principal residence, sub-subparagraph 160ZZQ(5)(e)(i)(B) applies to treat the dwelling as the taxpayer's sole or principal residence only from 1 July 1987 until 30 June 1991.

Note : As the 'relevant period' (subsection 160ZZQ(1)) also commenced on 1 October 1985, the taxpayer is not entitled to a full principal residence exemption. The full period of ownership (1 October 1985 - 1 December 1991) is a period of 2,253 days. The dwelling was the taxpayer's sole or principal place of residence from 1 July 1987 - 30 June 1991 [deemed] and from 1 July 1991 - 1 December 1991 [actual] (a total of 1,615 days). The dwelling was not the taxpayer's sole or principal residence for 638 (2,253 - 1,615) days. In accordance with subsection 160ZZQ(16), approximately 28 per cent (638/2,253) of any capital gain or loss on disposal of the dwelling would not be exempt.

Commissioner of Taxation
23/07/92

References

ATO references:
NO CGT Cell PRE

Subject References:
capital gains;
principal residence exemption;
relevant period;
relevant commencing date

Legislative References:
ITAA 160ZZQ(1);
ITAA 160ZZQ(5);
ITAA 160ZZQ(5)(e)(i);
ITAA 160ZZQ(5AA);
ITAA 160ZZQ(16)