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Draft Taxation Determination

TD 94/D99

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, is the six year period referred to in subparagraph 160ZZQ(11)(d)(iii) available in relation to each period of absence?

  • Please note that the PDF version is the authorised version of this draft ruling.
    This document has been finalised by TD 95/9.

FOI status:

draft only - for comment

Preamble

Draft Taxation Determinations (TDs) represent the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO.

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 sole or principal residence (SPR) more than once during the period of ownership of the SPR, the maximum six year period of income producing use can apply in relation to each period of absence. It is not the case that all periods of income-producing use are aggregated to calculate the six year period.

2. 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 Foreign Affairs 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 residence is rented again during this absence. On return, Gary sells the residence 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 even though the total period of income producing use exceeded 6 years.

Example 2

Peta ceases to use a dwelling (acquired post CGT) 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 an 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
15 September 1994

References

ATO references:
NO

ISSN 1038 - 8982

Related Rulings/Determinations:

TD 94/D98

Subject References:
elections
period of absence
principal residence exemption
use for income producing purposes

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


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