Edited version of private advice

Authorisation Number: 1051924186784

Date of advice: 19 November 2021

Ruling

Subject: CGT - commercial property

Question

Is a property owned by the individual Taxpayers for private use and mainly occupied by their daughter for which no rent is paid an asset being used solely for the personal use and enjoyment of the Taxpayers, such that the property will be disregarded under subparagraph 152-20(2)(b)(i) of the ITAA 1997 in working out the net value of the Taxpayers' CGT assets?

Answer

Yes,the property can be disregarded under 152-20(2)(b)(i) of the ITAA 1997 in working out the net value of the tax payers CGT assets as no rent has been paid on the property, as stated in ATO ID 2011/40.

This ruling applies for the following periods:

Year Ending 30 June 20XX

Year Ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You and your spouse own a commercial property as 50/50 tenants in common which is leased by a connected entity.

All of the shares in the connected entity are owned 50/50 by you and your spouse.

You and your spouse are planning to list the commercial property for sale and expect to make a capital gain.

You and your spouse also jointly own a residential townhouse that was acquired in July 20XX.

The townhouse was acquired during construction and you and your spouse moved into it as soon as practicable upon completion of construction on X December 20XX. You and your spouse intended at the time of acquisition to remain in the townhouse long-term as your main residence.

In April 20XX, you and your spouse moved out of the townhouse and moved into the current main residence.

The townhouse was retained on the basis that if you and your spouse did not like living in the new property you could move back into the townhouse and re-establish it as your main residence.

When you and your spouse moved into the new property in April 20XX, your adult daughter began residing in the townhouse rent free.

The daughter has continued to occupy the townhouse since 20XX to the present date rent free.

The townhouse has not been rented out during the entire ownership period.

The daughter is not an affiliate of your or your spouse.

You and your spouse left various personal possessions at the townhouse after you moved out, including items such as a lawn mower, gardening tools, ladders, BBQ, painting equipment and outdoor furniture.

You and your spouse provide ongoing maintenance and repairs on the townhouse as required, including internal paining, awning replacement, hot water system, courtyard pavers, and gardening.

Prior to COVID-19, you and your spouse stayed at the townhouse on some weekends, and house sat at the townhouse when your daughter was away on holidays.

You and your spouse are not a small business entity within the meaning of section 328-110 of the ITAA 1997.

Relevant legislative provisions

Income tax assessment act 1997 sub paragraph 152-20(2)(b)(i)