Taxation Laws Amendment Act (No. 3) 1997 (147 of 1997)

Schedule 5   Principal residence exemption from CGT

Part 1   Amendment of the Income Tax Assessment Act 1936

Division 4   Status of dwelling when first used for producing assessable income

33   After subsection 160ZZQ(20C)

Insert:

(20D) Despite subparagraphs (20C)(a)(ii) and (iii) and subsection 160X(5), if:

(a) a taxpayer acquires a dwelling on or after 20 September 1985; and

(b) for the first time (the first income time ) since the acquisition, the dwelling begins to be used for the purpose of gaining or producing assessable income; and

(c) assuming that the taxpayer had disposed of the dwelling immediately before the first income time, the disposal would have been covered by any of the following provisions:

(i) subsection (12) or (13A);

(ii) subsection (13);

(iii) if subparagraph (15)(b)(ii) would then have applied to the dwelling - subsection (15);

(iv) subparagraph (20C)(b)(i); and

(d) the taxpayer later disposes of the dwelling; and

(e) that later disposal is not covered by:

(i) subsection (14); or

(ii) if subparagraph (15)(b)(i) applies to the disposal - subsection (15);

then:

(f) for the purposes of this Part, the taxpayer is taken to have acquired the dwelling at the first income time for a consideration equal to its market value at that time; and

(g) for the purposes of this section, the taxpayer is taken not to have acquired the dwelling as a beneficiary in, or a trustee of, the estate of a deceased person; and

(h) if subparagraph (c)(ii) or (iii) of this subsection applies - throughout the period mentioned in paragraph (13)(d) or subparagraph (15)(b)(ii) (as appropriate) during which the dwelling was the sole or principal residence of any one or more of the following:

(i) the person who was, immediately before the deceased person's death, the deceased person's spouse;

(ii) a person who, under the deceased person's will, had a right to occupy the dwelling;

the dwelling is taken, for the purposes of this section, to have been the taxpayer's sole or principal residence.

Note: This means that, in applying this Part to the disposal, the period before the first income time (including any time when a deceased person owned the dwelling ) is to be disregarded. Subsection (12) or (16) might apply to the disposal (subject to subsection (21), which deals with use of the dwelling for the purpose of gaining or producing assessable income).