Edited version of private advice

Authorisation Number: 1052301952569

Date of advice: 19 September 2024

Ruling

Subject: Main residence exemption and taxable supply

Question 1

Is any gain on the sale of a duplex disregarded due to the application of the main residence exemption in Subdivision 118-B of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

Yes

Question 2

Is the sale of the duplex a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 2

No

This ruling applies for the following period:

Income year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

1.              The taxpayer is a medical professional registered for GST.

2.              He reports his GST quarterly on an accrual basis.

3.              The taxpayer entered into a contract to purchase the Property.

4.              Prior to this acquisition, the taxpayer had undertaken 2 other property developments.

5.              The taxpayer's intention when he acquired the Property was to demolish the existing dwelling, which was in a state of disrepair, and build a single dwelling to be their main residence. However, as a result of local Council discussions, the designer and builder advised him that it was unlikely Council would approve a single-story dwelling given its preference for high density housing for that location. The taxpayer agreed to submit a development application for the erection of a double story attached dual occupancy and a one lot into 2 lots Torrens title subdivision to Council.

6.              A development application was lodged with Council to subdivide the Property which was approved by Council.

7.              The taxpayer entered into a building contract with a builder to build 2 new residential duplexes.

8.              Duplex A was built with nicer fittings, as the taxpayer intended to use this duplex as their main residence and to keep duplex B as a long-term rental property.

9.              Construction of the duplexes commenced on XX/XX/20XX.

10.           The taxpayer and his wife moved out of their previous dwelling and moved into temporary accommodation.

11.           An application was lodged to have separate titles issued for duplex A and duplex B.

12.           Construction of both duplexes were completed on XX/XX/20XX.

13.           The taxpayer and his wife moved into duplex A the next day.

14.           Though the occupancy certificates for the duplexes were not issued at this stage, an interim occupancy certificate was issued that allowed the taxpayer and his wife to occupy duplex A.

15.           Separate titles issued for both duplexes on XX/XX/20XX.

16.           The taxpayer provided 2 real estate agent letters that advised their opinions on the rental and sale prospects for both duplexes.

17.           In light of the advice, the taxpayer and his wife decided to move into, and not rent, duplex B and sell duplex A.

18.           The taxpayer entered into an exclusive agency agreement to sell duplex A.

19.           Two weeks later, occupancy certificates were issued for both duplexes.

20.           A month later, a contract to sell duplex A was entered into.

21.           The day after, the taxpayer and his wife moved into duplex B.

22.           Settlement of A occurred a month later.

23.           Issues with next doors development continued with complaints discussed with the building inspector, builder, developer and council. After a while the issues started to be rectified, however the builder went bankrupt that required a new builder to be engaged.

24.           The following reasons were provided as to why the taxpayer decided to sell both duplexes, when he intended to keep both duplexes long term:

(a)           decided to sell duplex A soon after moving in on advice from a real estate agent that renting it would result in damage or deterioration by tenants and taxpayer personally feeling it was too nice to be a rental. At this time economists were predicting a significant rise in interest rates so decided to sell to reduce some debt

(b)           decided to sell duplex B due to the continual issues with next doors development that was causing the taxpayer and his wife mental and physical wellbeing and them deciding they no longer wanted to live at this address.

25.           The following reasons were provided as to why the taxpayer did not rent out either of the 2 duplexes:

(a)           excavation for the construction of next doors building resulted in the dividing fence and path being damaged and other issues. Construction was delayed due to builder going bankrupt. There was a concern of possible litigation if a tenant moved in and issues arose from next doors development. Verbal inquiries to rent out duplex B resulted in little or no enquiries due to significant issues from next doors construction and noise. The real estate agent advised that it could not be rented.

(b)           the taxpayer considered renting out duplex A, but the real estate agent's advice suggested otherwise.

26.           The taxpayer entered an exclusive agency agreement to sell duplex B a year after moving into duplex B.

27.           Two months later, the taxpayer entered into a contract to sell duplex B through an out-of-town buyer's agent.

28.           About 2 weeks before settlement of duplex B, the taxpayer purchased a dwelling to live in as their main residence.

29.           As a result of a GST audit for a previous Income year, the auditor assessed A on the revenue account and concluded that the taxpayer was carrying on an enterprise. Input tax credits were claimed for duplex A on the apportionment basis of X% of floor space area.

30.           The audit concluded that duplex A which is the property with the higher quality fittings was made in the course or furtherance of an enterprise.

31.           The taxpayer therefore did not claim the main residence exemption on the sale of duplex A.

32.           The taxpayer originally intended to use duplex A as a home and duplex B as a rental property. Due to physical and environmental issues, the taxpayer subsequently sold duplex A and duplex B became his main residence.

33.           The taxpayer has not claimed any input tax credits for the build of duplex B.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 6-5(1)

Income Tax Assessment Act 1997 subsection 6-10(2)

Income Tax Assessment Act 1997 section 10-5

Income Tax Assessment Act 1997 subsection 104-10(1)

Income Tax Assessment Act 1997 subsection 104-10(3)

Income Tax Assessment Act 1997 subdivision 118-B

Income Tax Assessment Act 1997 subsection 118-110(1)

Income Tax Assessment Act 1997 section 118-130

Income Tax Assessment Act 1997 section 118-150

Income Tax Assessment Act 1997 section 118-185

Income Tax Assessment Act 1997 subsection 118-185(2)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(b)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(c)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-5(d)

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

All legislative provisions referred to in Question 1 are to the ITAA 1997 unless otherwise stated.

Question 1

Is any gain on the sale of a duplex disregarded due to the application of the main residence exemption in Subdivision 118-B?

Summary

The main residence exemption will partly apply to disregard any capital gain made on the sale of duplex B for the period the taxpayer used it as his main residence.

Detailed reasoning

Are the profits from the sale of duplex B ordinary or statutory income?

1.              The profit made from the sale of duplex B can be treated for taxation purposes in the following ways, as:

(a)           ordinary income under subsection 6-5(1) resulting from carrying on the business

(b)           ordinary income under subsection 6-5(1) resulting from an isolated business transaction entered into in carrying out a commercial transaction, and

(c)            statutory income under subsection 6-10(2), on the basis that a mere realization of a capital asset has occurred.

Ordinary income - carrying on a business

2.              The proceeds of the sale of duplex B will fall within the scope of 'income according to ordinary concepts' if it is derived in the course of carrying on a business.

3.              The question of whether a business is being carried on is a question of fact and degree.

4.              Taxation Ruling TR 97/11- Income tax: am I carrying on a business of primary production? (TR 97/11) outlines the factors to be considered in determining whether a taxpayer is carrying on a business.

5.              Whilst each case might turn on its own particular facts, the determination of the question is generally the result of a process of weighting all the following relevant indicators that has been decided from various court decisions:[1]

(a)           whether the activity has a significant commercial purpose or character

(b)           whether the taxpayer has more than just an intention to engage in business

(c)            whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity

(d)           whether there is repetition and regularity of the activity

(e)           whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business

(f)             whether the activity is planned, organised and carried on in a businesslike manner such that it is directed at making a profit

(g)           the size, scale and permanency of the activity, and

(h)           whether the activity is better described as a hobby, a form of recreation or a sporting activity.

6.              Each of these indicators is examined below in the context of the facts in this case.

Significant commercial purpose or character

7.              In showing a business is being carried on, it is important the taxpayer is able to provide evidence that shows there is a significant commercial purpose or character to the activity, i.e., the activity is carried on for commercial reasons and in a commercially viable manner.[2]

8.              This indicator is closely linked to the other indicators and is a generalisation drawn from the interaction of the other indicators, in particular, to the size and scale of activity, the repetition and regularity of activity and the profit indicators. A way of establishing there is a significant commercial purpose or character is to compare the activities with those of a taxpayer who is carrying on a similar activity that is a business. Any knowledge, previous experience or skill of the taxpayer in the activity, and any advice taken by the taxpayer in the conduct of the business should also be considered but are not necessarily determinative: see Thomas v. FC of T 72 ATC 4094; (1972) 3 ATR 165.[3]

9.              Paragraph 30 in TR 97/11 lists a number of factors to show if there is a significant commercial purpose or character. In going through these factors, does not indicate or show that the taxpayer had a significant commercial purpose or character. In particular:

(a)            the taxpayer is a medical practitioner who acquired the Property for the purpose of demolishing the existing building and constructing a single-story dwelling to make it their main residence. However, after consulting a designer and builder, he was advised that Council would unlikely approve a single-story dwelling and recommended to lodge a dual occupancy development application. The taxpayer followed this advice and a dual occupancy development application was lodged.

(b)            by following the advice received, the taxpayer intended to make duplex A their main residence and to use duplex B as a long-term rental property.

(c)             the taxpayer and his wife moved into duplex A the day after construction was completed. With the construction issues from next door, he sought the advice of 2 real estate agents whose advice was to sell duplex A and move into duplex B, as it was too difficult to rent this duplex and they risked possible safety, legal and other issues with tenants.

(d)            after moving into duplex B, the issues with next door's development escalated, with the builder going bankrupt and a new builder being engaged, high turnover of 4 site supervisors and the fence and other issues not being dealt with. The problems impacted the taxpayer and his wife personally that led them to decide they no longer wanted to live at this address. Due to the stress and ongoing issues, an out-of-town buyer's agent assisted in selling the duplex.

(e)            though the taxpayer gave consideration to rising interest rates and wanting to reduce debt, this was not the primary reason for placing the property for sale.

10.          The sequence of events and activities carried out by the taxpayer, in the construction and sale of duplex B, indicates that it was not purchased and developed with a significant purpose or character to carry on a business. The duplex was developed with the intention for long term rental that ended up being used as their main residence. The duplex was sold due to the ongoing issues with next door's development that led them to no longer wanting to live at that address and needing the money to purchase another property to live in.

The intention of the taxpayer

11.          Paragraph 39 in TR 97/11 states:[4]

The intention of the taxpayer in engaging in the activity is a relevant indicator...However, a mere intention to carry on a business is not enough. There must be activity...

12.          In constructing the duplexes, it was the taxpayer's intention to rent out duplex B. However, the advice of 2 real estate agents was not to rent out this duplex and he risked possible safety, legal and other issues with tenants. The advice was to move into this duplex, which he followed.

13.          The taxpayer's intention at the time of purchasing the Property was to build duplex B to use it as a long-term rental property but ended up living in this duplex as their main residence by following the advice of 2 real estate agents. That is, his intention was not to carry on a business.

Prospect of profit

14.          It is important a taxpayer is able to show how the activity can make a profit. Paragraph 48 in TR 97/11 states:[5]

Stronger evidence of an intention to make a profit occurs when the taxpayer has conducted research into his/her proposed activity, consulted experts or received advice on the running of the activity and the profitability of it before setting up the business.

15.          From the information provided there is no evidence to indicate the taxpayer constructed B with the intention to make a profit. Unlike the construction of duplex A, the taxpayer did not put in high end fixtures and fittings, as he had intended to rent out this duplex.

16.          The taxpayer is a medical professional who engaged the expertise of various industry professionals in the development, construction and sale of duplex B. The advice provided by the 2 real estate agents is not advice provided in carrying out business activities but rather advice to assist the taxpayer in making an investment decision that involved taking into consideration the issues caused by next door's development. Whilst making a profit from the sale of this property was likely, the taxpayer needed to sell duplex B so that he could purchase another property to use as their main residence as they no longer wish to live in this duplex.

Repetition and regularity

17.          Paragraph 48 in TR 97/11 states:[6]

It is often a feature of a business that similar sorts of activities are repeated on a regular basis. The repetition of activities by the same person over a period of time on a regular basis helps to determine whether there is the 'carrying on' of a business.

18.          The taxpayer is a medical practitioner who has carried out 2 other property developments:

(a)           4 townhouses which have been owned by him and held as long-term rental properties, and

(b)           3 units, of which 2 units were sold for a profit with the remaining unit used as his main residence.

19.          Though duplex A was sold within a short period after moving into it as their main residence, the decision to sell this duplex took into account the advice of 2 real estate agents that included consideration of the issues caused by next door's development.

20.          Though The taxpayer took into account the predicted dramatic rises in interest rates, his main reason for selling duplex B was due to continuing issues with next doors development and the uncertainty surrounding its completion due to the builder going bankrupt that started to impact their mental and physical wellbeing.

21.          Whilst the taxpayer has been involved in 2 other property developments, the 4 townhouses are still held as long-term rental properties, 3 have been used as their main residence and 2 were built with the intention to make a profit. The sale of duplex B is not considered as a feature of a business that similar sorts of activities are repeated on a regular basis. A significant number of the dwellings were not built with the intention to make a profit, but for long term investment or to use as their main residence.

Is the activity of the same kind and carried on in a manner that is characteristic of the industry?

22.          Paragraph 63 in TR 97/11 states:[7]

An activity is more likely to be a business when it is carried on in a manner similar to that in which other participants in the same industry carry on their activities...

23.          In considering this indicator, paragraph 64 in TR 97/11 lists a number of factors that might be compared with the characteristics of others engaged in the same type of business. In going through these factors, the taxpayer did not carry out the property development in a manner that is characteristic of the industry. The taxpayer is a dentist who engaged designers, builders and real estate agents in dealing with these developments. The way the taxpayer has undertaken the development and construction of duplex B is not considered to be carried on in the manner characteristic of the industry. If it was, he would have sold the duplex soon after it was completed or as soon as a profit could be made.

Organisation in a businesslike manner and the use of system

24.          Paragraph 68 in TR 97/11 states:[8]

In Newton v. Pyke the court suggested that business should be conducted systematically. A business is characteristically carried on in a systematic and organised manner rather than on an ad hoc basis. An activity should generally conform with ordinary commercial principles to amount to the carrying on of a business.

25.          From the information provided, the taxpayer has not carried out this activity in a business-like manner or used a system to indicate that he was carrying on a business. The decision made to sell duplex B are reflective of making an investment and personal decision based on advice received and factors relating to responding to issues with next door's development.

Size or scale of the activity

26.          Paragraph 77 in TR 97/11 states:[9]

The larger the scale of the activity the more likely it will be that the taxpayer is carrying on a business of primary production. However, this is not always the case. The size or scale of the activity is not a determinative test, and a person may carry on a business though in a small way (Thomas at ATC 4099; ATR 171).

27.          The smaller the scale of the activity the more important the other indicators become when deciding whether a taxpayer is carrying on a business.[10]

28.          The taxpayer built 2 duplexes on the Property. As a result of an audit, duplex A was assessed on revenue account, even though the taxpayer and his wife moved into this duplex as their main residence the day after construction was completed. Whilst it is possible for this small scale development to be in the course of carrying on a business, it is our view the sale of duplex B was not done with the intention to make a profit, otherwise the duplex would have been sold soon after the dwelling was completed, which is what happened when duplex A was sold. Further, it was the taxpayer's intention to use this duplex as a long-term rental property but following the advice of 2 real estate agents decided not to rent it but to move into it as their main residence.

Hobby or recreation

29.          Paragraph 86 in TR 97/11 states:[11]

The pursuit of a hobby is not the carrying on of a business for taxation purposes. Money derived from the pursuit of a hobby is not regarded as income and therefore is not assessable.

30.          From the information provided, the taxpayer did not build duplex B in pursuit of a hobby or for recreation purposes.

Conclusion

31.          After examining all of the above indicators, it is our view the construction and sale of duplex B was not done in a way that it could be considered to be in the ordinary course of carrying on a business, such that the profit made from the sale of the property would be considered to be ordinary income under subsection 6-5(1).

Ordinary income - isolated transaction

32.          The High Court's decision in FC of T v The Myer Emporium Ltd 87 ATC 4363 clearly establishes that the profit arising from an isolated business transaction will be of an income nature if the taxpayer's purpose in entering into the transaction was to make a profit, notwithstanding that the transaction was extraordinary judged by reference to the ordinary course of the taxpayer's business.

33.          Isolated transactions are considered to be transactions outside the ordinary course of business of a taxpayer carrying on a business, as well as transactions entered into by non-business taxpayers.

34.          Taxation Ruling TR 92/3 Income tax: Whether profits on isolated transactions are income (TR 92/3), provides guidance in determining whether profits from isolated transactions are assessable under subsection 6-5(1) as ordinary income.

35.          TR 92/3 relevantly states:

6. Whether a profit from an isolated transaction is income according to the ordinary concepts and usages of mankind depends very much on the circumstances of the case. However, a profit from an isolated transaction is generally income when both of the following elements are present:

(a)           the intention or purpose of the taxpayer in entering into the profit-making transaction was to make a profit or gain, and

(b)           the transaction was entered into, and the profit was made, in the course of carrying out a business or carrying out a business operation or commercial transaction.

7. The relevant intention or purpose of the taxpayer (of making a profit or gain) is not the subjective intention or purpose of the taxpayer. Rather, it is the taxpayer's intention or purpose discerned from an objective consideration of the facts and circumstances of the case.

8. It is not necessary that the intention or purpose of profit-making be the sole or dominant intention or purpose for entering into the transaction. It is sufficient if profit-making is a significant purpose.

9. The taxpayer must have the requisite purpose at the time of entering into the relevant transaction or operation. If a transaction or operation involves the sale of property, it is usually, but not always, necessary that the taxpayer has the purpose of profit-making at the time of acquiring the property.

12. For a transaction to be characterised as a business operation or a commercial transaction, it is sufficient if the transaction is business or commercial in character.

13. Some matters which may be relevant in considering whether an isolated transaction amounts to a business operation or commercial transaction are the following:

(a) the nature of the entity undertaking the operation or transaction;

(b) the nature and scale of other activities undertaken by the taxpayer;

(c) the amount of money involved in the operation or transaction and the magnitude of the profit sought or obtained;

(d) the nature, scale and complexity of the operation or transaction;

(e) the manner in which the operation or transaction was entered into or carried out;

(f) the nature of any connection between the relevant taxpayer and any other party to the operation or transaction;

(g) if the transaction involves the acquisition and disposal of property, the nature of that property; and

(h) the timing of the transaction or the various steps in the transaction.

16. If a taxpayer not carrying on a business makes a profit, that profit is income if:

(a) the intention or purpose of the taxpayer in entering into the profit-making transaction or operation was to make a profit or gain; and

(b) the transaction or operation was entered into, and the profit was made, in carrying out a business operation or commercial transaction.

36.          Unlike the facts in the Bowerman and Commissioner of Taxation [2023] AATA 3547, The taxpayer did not have the intention to profit make from the sale of duplex B, but to hold this duplex as a long-term rental property. That is, he purchased this duplex with the intention to hold it for investment. Therefore, the first element in paragraph 6(a) in TR 92/3 is not satisfied as he did not purchase duplex B with the intention of entering into a profit-making transaction or to make a profit.

37.          In respect of whether the second element in paragraph 6(b) in TR 92/3 is satisfied, consideration of the matters in paragraph 13 in TR 92/3 requires consideration. From the information provided, the taxpayer engaged the services of others to carry out the development and sale of the duplexes, e.g., a builder, designer and real agents. It should be noted that whilst the taxpayer has undertaken 2 other property developments over a number of years, he is a medical practitioner and engages the services of others to carry out the property development. Whilst a profit was made from the sale of duplex B, the evidence does not support that the taxpayer made the profit in carrying out a business operation or commercial transaction.

38.          Whilst the taxpayer intended to rent duplex B, he decided not to rent this duplex based on the advice of 2 real estate agents and not wanting to risk any legal consequences that may emanate with potential health and safety issues with tenants. The taxpayer decided to move into this duplex with his wife. The continuing issues and problems with next doors development and the uncertainty regarding its completion, including the builder going bankrupt and finding a new builder, led the taxpayer and his wife to reconsider their decision of whether they wanted to stay at this address for the sake of their health and relationship. The decision was made to place the duplex on the market, as the taxpayer no longer wanted to live at that address and attempts to work with council and the neighbouring owner failed to resolve their concerns. This points to the taxpayer's main reason for deciding to dispose of this duplex was for personal reasons.

39.          Therefore, neither of the elements in paragraph 6 in TR 92/3 have been satisfied. It is our view the taxpayer did not make a profit from an isolated transaction that is ordinary income.

40.          Moreover, from an income tax perspective, the taxpayer intended to use duplex B as a long-term rental property, that is for investment purposes and not for the purpose of making a profit. By choosing to use the duplex as their main residence does not change this intention to one of making a profit or to be on revenue account. Instead, it supports the view the duplex was held on capital account.

Statutory income - capital gains tax - main residence exemption

41.          Amounts that are not ordinary income but are included in your assessable income by provisions about assessable income, are called statutory income.[12]

42.          The table in section 10-5 provides a comprehensive listing of the relevant statutory provisions and includes capital gains.

43.          CGT event A1 in subsection 104-10(1) happened when the taxpayer disposed of duplex B. As The taxpayer made a capital gain from this disposal, the time of the event is when he entered into a contract for the disposal.

44.          A capital gain you make from a CGT event may be disregarded if the asset is a dwelling that was your main residence throughout your ownership period.[13]

45.          The taxpayer bought the Property. Construction of both duplexes was completed with the taxpayer and his wife moving into duplex A. A contract to sell duplex A was entered into resulting in the taxpayer and his wife moving into duplex B. The taxpayer and his wife used duplex B as their main residence until this duplex was sold by contract.

46.          The taxpayer is not entitled to use the main residence concession in section 118-150, as he did not move into this dwelling as soon as practicable due to living in duplex A for a period of time.

47.          As the taxpayer and his wife lived in duplex B as their main residence for part of his ownership period, the taxpayer is entitled to claim a partial exemption for the period the dwelling was his main residence pursuant to section 118-185.

48.          In working out the partial main residence exemption for the taxpayer, the formula in subsection 118-185(2) is to be used in conjunction with section 118-130.

All legislative provisions referred to in Question 2 are to the GST Act unless otherwise stated and any terms marked with an asterisk are defined in section 195-1.

Question 2

Is the sale of duplex B a taxable supply pursuant to section 9-5?

Summary

The sale of duplex B by the taxpayer will not be a taxable supply.

Detailed reasoning

49.          Section 9-40 provides that you are liable for GST on any taxable supplies that you make.

50.          Section 9-5 states:

You make a taxable supply if:

(a)           you make the supply for consideration; and

(b)           the supply is made in the course or furtherance of an *enterprise that you carry on; and

(c)            the supply is connected with the indirect tax zone; and

(d)           you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

51.          From the information provided, the taxpayer's supply of duplex B will satisfy the requirements in paragraphs 9-5(a), (c) and (d) as the supply of duplex B was made for consideration, is located in Australia, and he is registered for GST.

52.          It therefore needs to be determined whether the remaining requirement in paragraph 9-5(b) is satisfied, i.e., whether the sale of duplex B was made in the course or furtherance of an enterprise that he carried on.

53.          From the facts provided, it is considered that the activities the taxpayer conducted over time have amounted to an enterprise, be it a leasing and/or property development enterprise. However, due to various extenuating external factors relating to the Property and its surroundings that had impacted the taxpayer, he subsequently applied duplex B solely for a private purpose as his primary place of residence.

54.          As B was being used by the taxpayer solely for his private purpose, his sale of duplex B is considered to be a disposal of a private asset that was not made in the course or furtherance of an enterprise.

55.          Therefore, as the sale of duplex B did not satisfy all the requirements in section 9-5, the sale will not be a taxable supply.

[1] Paragraph 13 in TR 97/11.

[2] Paragraph 28 in TR 97/11

[3] Paragraph 29 in TR 97/11

[4] Paragraph 39 in TR 27/11

[5] Paragraph 48 in TR 97/11

[6] Paragraph 55 of TR 97/11

[7] Paragraph 63 in TR 97/11

[8] Paragraph 68 in TR 97/11

[9] Paragraph 77 in TR 97/11

[10] Paragraph 82 in TR 97/11

[11] Paragraph 77 in TR 97/11

[12] Subsection 6-10(2)

[13] Subsection 118-110(1)