ATO Interpretative Decision
ATO ID 2001/325 (Withdrawn)
Income Tax
Capital Gains: Main Residence Exemption: Adjacent LandFOI status: may be released
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This ATO ID is withdrawn. Guidance on the basis of the decision in this ATO ID can be found in Taxation Determinations TD 92/171, TD 1999/67, and TD 1999/68.
Guidance relating to the issue addressed in this ATO ID can be found in Residential rental properties (QC 22168, QC 22169).
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Whether the taxpayer can select up to 2 hectares of adjacent post-CGT land as exempt under the main residence exemption in Subdivision 118-B of the Income Tax Assessment Act 1997 (ITAA 1997), if the land under the dwelling is pre-CGT land.
Decision
Yes, the taxpayer may choose to apply the main residence exemption to 2 hectares of adjacent post-CGT land. The pre-CGT land under the dwelling is not taken into account in determining the 2 hectare area.
Facts
Prior to 20 September 1985 the taxpayer purchased a block of land containing approximately 3 hectares and a dwelling was constructed on this property.
After 19 September 1985, the taxpayer acquired an adjoining block of land containing approximately 3 hectares. This block was purchased specifically to increase the land area surrounding the taxpayer's main residence, and to improve the privacy of the taxpayer's dwelling.
The taxpayer uses both of the properties only for private and domestic purposes during the period of ownership.
Reasons for Decision
Section 118-120 of the ITAA 1997 provides that the main residence exemption can include land adjacent to the dwelling to the extent that it is used primarily for private or domestic purposes in association with the dwelling. Sub-section 118-120(3) of the ITAA 1997 specifies the maximum area of land that is covered by the main residence exemption (including the area under the dwelling) must not exceed 2 hectares.
As the land on which the taxpayer's dwelling is built is pre-CGT land, any capital gain on disposal is disregarded under sub-section 104-10(5) of the ITAA 1997. Consequently, in this case, the land under the dwelling is not taken into account in determining the area of adjacent land that qualifies for the main residence exemption. Therefore, the taxpayer may choose to apply the main residence exemption to the adjacent post-CGT land, up to a maximum of 2 hectares.
Note: Taxation Determination TD 1999/67 states that where your land (including the land on which your dwelling is situated) exceeds 2 hectares, you can apply the main residence exemption in Subdivision 118-B of the ITAA 1997 to whichever area of land you choose in addition to the land on which your dwelling is situated.
Amendment History
| Date of amendment | Part | Comment |
|---|---|---|
| 22 November 2013 | Reason for Decision | Updated legislative reference. |
| Legislative References | Updated legislative reference. | |
| Related Public Rulings (including Determinations) | Additional related ATO Taxation Determination added. |
Legislative References:
Income Tax Assessment Act 1997
Subdivision 118-B
section 118-120
subsection 118-120(3)
subsection 104-10(5)
Related Public Rulings (including Determinations)
TD 92/171
TD 1999/67
TD 1999/68
Keywords
Capital gains tax
CGT exemptions
Main residence
Dwelling
ISSN: 1445-2782
| Date: | Version: | |
| 22 June 2001 | Original statement | |
| 22 November 2013 | Updated statement | |
| You are here | 5 May 2017 | Archived |