The AAT has affirmed the Commissioner’s decision denying a taxpayer’s claim for the CGT main residence exemption in relation to a disposal of a property.
The taxpayer submitted that he had purchased the property in July 2002 with this then de facto partner. The construction of the house commenced in April 2004; however, his relationship with his then partner ended in September 2004. In approximately May or June 2005, he and his then ex-partner moved into the house “to enable us to meet the requirements to sell the property ‘without’ being subject to CGT”. In September 2005, the taxpayer moved out of the house and in November 2005, the house was sold.
A net capital gain of id=”mce_marker”14,675 on the sale of a property was included as income in the taxpayer’s notice of assessment for the 2006 income year. The taxpayer disputed the inclusion of the capital gain in his income for the 2006 year on the basis that he was entitled to the CGT main residence exemption under Subdiv 118-B of the ITAA 1997. Before the hearing, the taxpayer provided the Commissioner documentary evidence of certain construction, holding and sale costs, which the Commissioner accepted – this reduced the net capital gain to $66,271.
However, the AAT held the evidence before it failed to establish that the house became the taxpayer’s main residence as soon as practicable after the completion of its construction and that the house continued to be the taxpayer’s main residence for at least 3 months after that, as required by s 118-150(3)(a) and (b) of the ITAA 1997. Accordingly, it held the taxpayer had failed to discharge the burden of proof that the assessment was excessive.
(AAT Case [2013] AATA 709, Re Keep and FCT, AAT, Ref No: 2013/1703, Walsh SM, 26 September 2013.)
[LTN 192, 3/10/13]
Section 118-150 of the Income Tax Assessment Act 1997
IF YOU BUILD, REPAIR OR RENOVATE A DWELLING
(1) This section applies to land in which you have an * ownership interest (except a life interest) if you build a * dwelling on the land, or repair, renovate or finish building a dwelling on the land.
(2) You can choose to apply this Subdivision as if the * dwelling that you are building, repairing or renovating on the land were your main residence from the time you * acquired the * ownership interest.
(3) You can make the choice only if:
(a) a * dwelling on the land that you construct, repair or renovate becomes your main residence (except because of section 118– 147) as soon as practicable after the work is finished; and
(b) it continues to be your main residence for at least 3 months.
(4) There is a time limit during which the choice can operate. This is the shorter of:
(a) 4 years, or a longer time allowed by the Commissioner, before the * dwelling becomes your main residence; and
(b) the period starting when you * acquired your * ownership interest in the land and ending when the dwelling becomes your main residence.
(5) If there was already a * dwelling on the land when you * acquired your * ownership interest and you or someone else occupied it after that time, the period in subsection (2) and paragraph (4)(b) starts when the dwelling ceased to be occupied.
(6) Once you make the choice, no other * dwelling can be treated as your main residence during the period referred to in subsection (4), except if section 118– 140 (about changing main residences) applies.