INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 18 - Principal residence  

SECTION 160ZZQ   PRINCIPAL RESIDENCE  

160ZZQ(1)   [Definitions]  

In this section:

"dependent child"
, in relation to a taxpayer, means a child of the taxpayer who is under the age of 18 years and is dependent on the taxpayer for economic support;

"dwelling"
includes:

(a) a unit of accommodation constituted by, or contained in, a building, being a unit that consists, in whole or in substantial part, of residential accommodation; and

(b) a caravan, houseboat or other mobile home;

"relevant period"
, in relation to the disposal of a dwelling by a taxpayer other than a taxpayer in the capacity of a trustee, means the period after 19 September 1985 during which the dwelling was owned by the taxpayer and includes any period during which land acquired after that date on which the dwelling is erected was owned by the taxpayer before the erection of the dwelling.

160ZZQ(1AA)   [Legal ownership]  

For the purposes of this section, if:

(a) land or a dwelling is acquired or disposed of under a contract entered into at a particular time; and

(b) legal ownership of the land or dwelling does not pass until a later time;

then, in spite of any other provision of this Part, the ownership of the land or dwelling is to be worked out on the basis of the legal ownership.

160ZZQ(1AB)   [Right to occupy before legal ownership]  

If, under the contract mentioned in subsection (1AA) or another contract entered into in relation to it, the person to whom the legal ownership is to pass has a right or licence to occupy the land or dwelling before legal ownership passes, then that subsection has effect in relation to that person as if the legal ownership began when the licence or right was first exercisable.

160ZZQ(1A)   [Where post 20/9/85 asset disposed of]  

For the purposes of this section, where:

(a) an asset was disposed of by a company or a trustee of a trust estate to a taxpayer;

(b) the asset was acquired by the company or the trustee on or after 20 September 1985; and

(c) because of section 160ZZMA , this Part (other than that section) does not apply in respect of the disposal;

the following provisions have effect:

(d) the taxpayer shall be treated as having owned the asset at all times during the period (in this subsection called the ``prior ownership period'' ) commencing at the time when the company or trustee acquired the asset and ending at the time of the disposal of the asset;

(e) a dwelling to which the asset relates shall not be treated as the sole or principal residence of the taxpayer during the prior ownership period.

160ZZQ(2)   [Ownership or acquisition of dwelling]  

For the purposes of this section, a person shall be taken to own, or to have acquired, a dwelling constituted by or contained in a building if the person owns or has acquired, as the case may be:

(a) in the case of a dwelling other than a flat or home unit:

(i) a legal or equitable estate or interest in the land on which the dwelling is erected; or

(ii) a licence or right to occupy the dwelling; or

(b) in the case of a flat or home unit:

(i) a legal or equitable estate or interest in a stratum unit in relation to the flat or home unit;

(ii) a licence or right to occupy the flat or home unit; or

(iii) a share in a company that owns a legal or equitable estate or interest in the land on which the building containing the flat or home unit is erected, being a share that entitles the holder to a right of occupancy of the flat or home unit.

160ZZQ(3)   [Adjacent land, etc]  

For the purposes of this section, a dwelling owned by a person shall be deemed to include -

(a) any land owned by the person that is adjacent to the dwelling to the extent that:

(i) that land is used by the person primarily for private or domestic purposes in association with the dwelling; and

(ii) the sum of the area of that land and the area of the land on which the dwelling is situated does not exceed 2 hectares; and

(b) in the case of a dwelling being a flat or home unit - a garage, storeroom or other structure owned by the person that forms part of or is attached to or otherwise associated with the building containing the flat or home unit and is used by the person primarily for private or domestic purposes.

160ZZQ(4)   [Disposal of adjacent land]  

If:

(a) land that by virtue of paragraph (3)(a) forms part of a dwelling owned by a person is disposed of by the person separately from the rest of the dwelling; or

(b) a garage, storeroom or other structure that forms part of a dwelling owned by a person is disposed of by the person separately from the rest of the dwelling;

this section does not apply in respect of the disposal.

160ZZQ(5)   [Erection of dwelling by taxpayer]  

Where:

(a) a taxpayer has at any time (in this subsection called the ``relevant time'' ), whether before or after the commencement of this subsection, acquired a legal or equitable estate or interest (other than a life interest) in land; and

(b) one of the following subparagraphs is applicable:

(i) no dwelling or partly erected dwelling was on the land at the relevant time and, after that time, the taxpayer:

(A) erected a dwelling on the land; or

(B) commenced to erect a dwelling on the land but died before the erection of the dwelling was completed;

(ii) a partly erected dwelling was on the land at the relevant time and, after that time, the taxpayer:

(A) completed the erection of the dwelling; or

(B) commenced to complete the erection of the dwelling but died before the erection of the dwelling was completed;

(iii) a dwelling or partly erected dwelling was on the land at the relevant time and, after that time, the taxpayer demolished the dwelling or partly erected dwelling and:

(A) erected a new dwelling on the land; or

(B) commenced to erect a new dwelling on the land but died before the erection of the dwelling was completed;

(iv) a dwelling was on the land at the relevant time and, after that time, the taxpayer:

(A) repaired or renovated the dwelling; or

(B) commenced to repair or renovate the dwelling but died before the repairs or renovations were completed; and

(c) if sub-subparagraph (b)(i)(A), (ii)(A), (iii)(A) or (iv)(A) applies:

(i) the dwelling became the sole or principal residence of the taxpayer for the purposes of this Part as soon as practicable after the dwelling was erected, the erection of the dwelling was completed or the repair or renovation of the dwelling was completed, as the case requires and continued to be the sole or principal residence of the taxpayer for the purposes of this Part for not less than 3 months; or

(ii) the taxpayer died after the dwelling was erected, the erection of the dwelling was completed or the repair or renovation of the dwelling was completed, as the case requires and the taxpayer's death occurred:

(A) before it was practicable for the dwelling to become the taxpayer's sole or principal residence; or

(B) during the period of 3 months referred to in subparagraph (i); and

(d) an election that this subsection is to apply in relation to the dwelling is made in accordance with subsection (5A) or (5B) by:

(i) in a case where subparagraph (ii) does not apply - the taxpayer; or

(ii) in a case where sub-subparagraph (b)(i)(B), (ii)(B), (iii)(B) or (iv)(B) or subparagraph (c)(ii) applies or any other case where the taxpayer died before the end of the period allowed for making an election without having made an election:

(A) if the taxpayer held the estate or interest as a joint tenant - the surviving joint tenant; or

(B) otherwise - the trustee of the estate of the taxpayer;

the following provisions have effect:

(e) if subparagraph (c)(i) applies:

(i) the period during which the dwelling was the sole or principal residence of the taxpayer for the purposes of this Part includes:

(A) the period on and from the relevant commencing date to and including the date on which the dwelling was erected, the erection of the dwelling was completed or the repair or renovation of the dwelling was completed, as the case requires (other than any part of that period during which the taxpayer was the dependent child of another taxpayer); or

(B) the period of 4 years immediately before the dwelling became the sole or principal residence of the taxpayer (other than any part of that period during which the taxpayer was the dependent child of another taxpayer);

whichever period (in this paragraph called the ``construction period'' ) is the shorter period; and

(ii) no other dwelling is to be treated as having been the sole or principal residence of the taxpayer during the construction period;

(f) if sub-subparagraph (b)(i)(B), (ii)(B), (iii)(B) or (iv)(B) or subparagraph (c)(ii) applies:

(i) this Part has effect as if the dwelling was the sole or principal residence of the taxpayer at the time of his or her death; and

(ii) the period during which the dwelling was the sole or principal residence of the taxpayer for the purposes of this Part includes:

(A) the period on and from the relevant commencing date to and including the date of the death of the taxpayer (other than any part of that period during which the taxpayer was the dependent child of another taxpayer); or

(B) the period of 4 years immediately before the death of the taxpayer (other than any part of that period during which the taxpayer was the dependent child of another taxpayer);

whichever period (in this paragraph called the ``construction period'' ) is the shorter period; and

(iii) no other dwelling is to be treated as having been the sole or principal residence of the taxpayer during the construction period.

160ZZQ(5AA)   [Commencement of erection of dwelling]  

For the purposes of subsection (5):

(a) a reference to the relevant commencing date is a reference to:

(i) if subparagraph (5)(b)(iii) applies and the dwelling, or partly completed dwelling, that was demolished was occupied by the taxpayer or another person after the relevant time - the date on which the dwelling ceased, or last ceased, to be so occupied; or

(ia) if:

(A) subparagraph (5)(b)(iv) applies; and

(B) the dwelling was occupied by the taxpayer or another person after the relevant time; and

(C) the dwelling ceased to be so occupied for the purpose of allowing the repairs or renovations to be carried out;

the date on which the dwelling ceased, or last ceased, to be so occupied; or

(ii) otherwise - the date on which the taxpayer acquired the estate or interest in the land; and

(b) a taxpayer who has, whether before or after the commencement of this subsection, entered into a contract or contracts for the erection of, or for the completion of the erection of, a dwelling is taken to have commenced to erect, or to have commenced to complete the erection of, the dwelling at the time when the contract or the first contract was entered into; and

(c) a taxpayer who has, whether before or after the commencement of this paragraph, entered into a contract or contracts for the repair or renovation of a dwelling is taken to have commenced to repair or renovate the dwelling at the time when the contract or the first contract was entered into.

160ZZQ(5A)   [Subsec (5) election]  

An election for the purposes of subsection (5) does not have any effect unless it is made on or before the date of lodgment of the taxpayer's return of income of the later of the following years of income:

(a) the year of income in which the dwelling first became the sole or principal residence of the taxpayer for the purposes of this Part;

(b) the year of income in which this subsection commenced;

or within such further period as the Commissioner allows.

160ZZQ(5B)   [Election by joint tenant or trustee]  

An election by a surviving joint tenant, or a trustee, in relation to a deceased taxpayer for the purposes of subsection (5) does not have any effect unless it is made on or before whichever is the later of the following dates:

(a) the date of lodgment of the return of income of the deceased taxpayer's estate for the year of income in which the taxpayer died;

(b) the last day of the year of income in which the Act that inserted this subsection received the Royal Assent;

or within such further period as the Commissioner allows.

160ZZQ(6)   [Acquisition as beneficiary of trust estate]  

A reference in this section to a taxpayer having acquired a dwelling as a beneficiary in the estate of a deceased person is a reference to a taxpayer having acquired a dwelling:

(a) under the will of a deceased person, or under such a will as varied by an order of a court; or

(b) by operation of a law as a result of the intestacy of a deceased person, or by operation of law as a result of such an intestacy as the operation of the law is varied by an order of a court; or

(c) under a deed of arrangement where:

(i) the deed was entered into in settlement of a claim to participate in the distribution of the estate of the deceased person; and

(ii) the consideration (if any) given by the taxpayer for the dwelling consisted of the variation or waiver of a claim to one or more other assets that formed part of that estate;

whether the dwelling was transmitted directly to the taxpayer or was transferred to the taxpayer by the executor of the will, or by the administrator of the estate, of the deceased person.

160ZZQ(6A)   [Acquisition as surviving joint tenant]  

Where:

(a) a taxpayer and another person owned a dwelling as joint tenants; and

(b) the other person died;

this section applies according to its tenor to the acquisition by the taxpayer of the dwelling as a result of the death of the other person as it applies to a taxpayer who acquired the dwelling as a beneficiary in the estate of a deceased person.

160ZZQ(7)   [Acquisition, disposal of dwelling]  

A reference in this section to the acquisition or disposal by a person of a dwelling or to the transmission or transfer of a dwelling to a person includes a reference to the acquisition or disposal by a person or to the transmission or transfer to a person, as the case may be, of the asset the ownership of which, by virtue of subsection (2), constitutes ownership of the dwelling.

160ZZQ(8)   [Sole or principal residence]  

For the purposes of this section -

(a) a dwelling shall be deemed to be the sole or principal residence of a person at a particular time notwithstanding that it is used at that time both for that purpose and another purpose or other purposes; and

(b) where -

(i) a taxpayer disposes of a dwelling that -

(A) was the sole or principal residence of the taxpayer for a continuous period of not less than 3 months included in the period of 12 months ending at the time of disposal; and

(B) the dwelling was not used for gaining or producing assessable income in any part of that period of 12 months other than the part of that period in which the dwelling was also the sole or principal residence of the taxpayer; and

(ii) before disposing of the dwelling, the taxpayer acquired another dwelling and that other dwelling became the next sole or principal residence of the taxpayer,

each of those dwellings shall be deemed to be the sole or principal residence of the taxpayer during -

(iii) in a case where the taxpayer acquired that other dwelling more than 3 months before the time of disposal - the period of 3 months ending at the time of disposal; or

(iv) in any other case - the period commencing on the day on which the taxpayer acquired that other dwelling and ending at the time of disposal.

160ZZQ(9)   [Spouses with different sole or principal residences]  

Where -

(a) a dwelling is the sole or principal residence of a taxpayer at a particular time; and

(b) at that time, another dwelling is the sole or principal residence of the taxpayer's spouse or of a dependent child of the taxpayer,

whichever of those dwellings is nominated by the taxpayer and the taxpayer's spouse, or by the taxpayer, as the case may be, shall, for the purposes of this section, be deemed to be the sole or principal residence of the taxpayer and the taxpayer's spouse, or the taxpayer and the dependent child of the taxpayer, as the case may be, at that time.

160ZZQ(10)   [Spouses nominating different dwellings]  

Where, under subsection (9), a taxpayer nominates a dwelling, and the taxpayer's spouse nominates a different dwelling, in relation to the same period -

(a) in the case of the dwelling nominated by the taxpayer -

(i) if the interest of the taxpayer in the dwelling throughout that period did not exceed one-half of the total of all the interests in the dwelling - the dwelling shall, for the purposes of this section, be deemed to have been the sole or principal residence of the taxpayer during that period; or

(ii) in any other case - the dwelling shall, for the purposes of this section, be deemed to have been the sole or principal residence of the taxpayer during one-half of that period; or

(b) in the case of the dwelling nominated by the taxpayer's spouse -

(i) if the interest of the spouse in the dwelling throughout that period did not exceed one-half of the total of all the interests in the dwelling - the dwelling shall, for the purposes of this section, be deemed to have been the sole or principal residence of the spouse during that period; or

(ii) in any other case - the dwelling shall, for the purposes of this section, be deemed to have been the sole or principal residence of the spouse during one-half of that period.

160ZZQ(11)   [Cessation of use as sole or principal residence]  

Where:

(a) at a particular time (in this subsection called the ``cessation time'' ), a dwelling owned by a taxpayer ceases to be the sole or principal residence of the taxpayer (disregarding subsection (20D)); and

(b) an election that this subsection is to apply in relation to the taxpayer and in relation to the dwelling is made in accordance with subsection (11A) by:

(i) if the taxpayer died before the end of the period allowed for making an election without having made an election:

(A) if the taxpayer and another person owned the dwelling as joint tenants - the surviving joint tenant; or

(B) otherwise - the trustee of the estate of the taxpayer; or

(ii) in any other case - the taxpayer;

then, for the purposes of this section (other than this subsection and subsection (20D)), during the period:

(c) commencing at the cessation time; and

(d) ending at the earliest of the following later times:

(i) the time when the dwelling again became the sole or principal residence of the taxpayer;

(ii) the end of the relevant period;

(iii) the end of the period of 6 years (whether that period is continuous or represents the aggregation of 2 or more periods):

(A) commencing at or after the cessation time; and

(B) during which the part of the dwelling that was the sole or principal residence of the taxpayer before the cessation time was used for the purpose of gaining or producing assessable income;

the following provisions have effect:

(e) the dwelling is taken to have been the sole or principal residence of the taxpayer;

(f) no other dwelling is taken as having been the sole or principal residence of the taxpayer;

(g) any use for the purpose of gaining or producing assessable income of the part of the dwelling that was the sole or principal residence of the taxpayer before the cessation time is to be disregarded.

160ZZQ(11A)   [Election for purposes of subsec (11)]  

An election for the purposes of subsection (11) must be made:

(a) in the case of an election by a taxpayer - on or before the date of lodgment of the taxpayer's return of income for the later of the following years of income:

(i) the year of income in which the disposal of the dwelling takes place;

(ii) the year of income in which this subsection commenced; or

(b) in the case of an election by a surviving joint tenant, or a trustee, in relation to a deceased taxpayer - on or before whichever is the later of the following dates:

(i) the date of lodgment of the return of income of the deceased taxpayer's estate for the year of income in which the taxpayer died;

(ii) the last day of the year of income in which this subsection commenced;

or, in either case, within such further period as the Commissioner allows.

160ZZQ(12)   [Natural person other than beneficiary or trustee]  

Subject to subsection (21), where -

(a) a dwelling owned by a taxpayer, being a natural person other than -

(i) a person who acquired the dwelling as a beneficiary in the estate of a deceased person; or

(ii) a person in the capacity of a trustee,

is disposed of; and

(b) the dwelling was, throughout the relevant period, the sole or principal residence of the taxpayer,

a capital gain shall not be deemed to have accrued to the taxpayer, and a capital loss shall not be deemed to have been incurred by the taxpayer, as the case requires, in respect of the disposal of the dwelling.

160ZZQ(13)   [Beneficiary using dwelling as sole or principal residence]  

Subject to subsection (21), where:

(a) a dwelling owned by a taxpayer, being a natural person who acquired the dwelling as a beneficiary in the estate of a deceased person, is disposed of;

(b) the dwelling was the sole or principal residence of the taxpayer throughout that part of the relevant period during which the taxpayer was (disregarding section 160X ) the owner of the dwelling;

(c) if the dwelling was acquired by the deceased person after 19 September 1985 - the dwelling was, immediately before the death of the deceased person, the sole or principal residence of the deceased person; and

(d) the dwelling was, throughout the period from the death of the deceased person during which the dwelling was owned by the legal personal representative of the deceased person, the sole or principal residence of any one or more of the following:

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

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

a capital gain shall not be deemed to have accrued to the taxpayer, and a capital loss shall not be deemed to have been incurred by the taxpayer, as the case requires, in respect of the disposal of the dwelling.

160ZZQ(13A)   [Dwelling acquired as beneficiary of trust estate]  

Subject to subsection (21), where:

(a) a dwelling owned by a taxpayer, being a natural person who acquired the dwelling as a beneficiary in the estate of a deceased person, is disposed of;

(b) the dwelling was, throughout the period from the death of the deceased person to the disposal of the dwelling, the sole or principal residence of the taxpayer; and

(c) if the dwelling was acquired by the deceased person after 19 September 1985 - the dwelling was, immediately before the death of the deceased person, the sole or principal residence of the deceased person;

a capital gain shall not be deemed to have accrued to the taxpayer, and a capital loss shall not be deemed to have been incurred by the taxpayer, as the case requires, in respect of the disposal of the dwelling.

160ZZQ(14)   [Disposal by beneficiary of deceased estate]  

Subject to subsection (21), where:

(a) a taxpayer, being a natural person, disposes of a dwelling that the taxpayer acquired as a beneficiary in the estate of a deceased person;

(b) the disposal took place within 2 years after the date of the death of the deceased person; and

(c) if the dwelling was acquired by the deceased person after 19 September 1985, the dwelling was, immediately before the death of the deceased person, the sole or principal residence of the deceased person,

a capital gain shall not be deemed to have accrued to the taxpayer, and a capital loss shall not be deemed to have been incurred by the taxpayer, as the case requires, in respect of the disposal of the dwelling.

160ZZQ(15)   [Disposal by trustee of deceased estate]  

Subject to subsection (21), where:

(a) a dwelling owned by a taxpayer in the capacity of the trustee of the estate of a deceased person is disposed of;

(b) either of the following subparagraphs is applicable:

(i) the disposal took place within 2 years after the date of the death of the deceased person; or

(ii) the dwelling was, throughout the period from the death of the deceased person to the time of disposal of the dwelling by the taxpayer, the sole or principal residence of any one or more of the following:

(A) the person who was, immediately before the death of the deceased person, the spouse of the deceased person;

(B) a person who, under the will of the deceased person, had a right to occupy the dwelling; and

(c) if the dwelling was acquired by the deceased person after 19 September 1985, the dwelling was, immediately before the death of the deceased person, the sole or principal residence of the deceased person;

a capital gain shall not be deemed to have accrued to the taxpayer, and a capital loss shall not be deemed to have been incurred by the taxpayer, as the case requires, in respect of the disposal of the dwelling.

160ZZQ(16)   [Natural person - partial exemption]  

Subject to subsection (21), where:

(a) a dwelling owned by a taxpayer referred to in paragraph (12)(a) is disposed of;

(b) the dwelling was the sole or principal residence of the taxpayer during part only of the relevant period; and

(c) but for this section and subsection 160ZA(1) , a capital gain would have accrued to the taxpayer, or the taxpayer would have incurred a capital loss, in respect of the disposal;

a capital gain shall be deemed to have accrued to the taxpayer, or the taxpayer shall be deemed to have incurred a capital loss, as the case may be, in respect of the disposal of the dwelling, of an amount calculated in accordance with the formula

AB C

,

where:

A is the amount of the capital gain or of the capital loss, as the case may be, referred in paragraph (c);

B is the number of days in the part of the relevant period during which the dwelling was not the sole or principal residence of the taxpayer; and

C is the number of days in the relevant period.

160ZZQ(17)   [Beneficiary - partial exemption]  

Subject to subsections (20A) and (21), where:

(a) a dwelling owned by a taxpayer referred to in paragraph (13)(a) is disposed of;

(aa) the disposal is not covered by subsection (13), (13A) or (14);

(b) any one or more of the following subparagraphs is or are applicable:

(i) the dwelling was the sole or principal residence of the taxpayer during the whole or a portion of the part of the relevant period referred to in paragraph (13)(b);

(ii) in a case to which paragraph (13)(c) applies - the dwelling was the sole or principal residence of the deceased person referred to in that paragraph during the whole or part of the period during which the deceased person owned the dwelling;

(iii) in a case to which paragraph (13)(d) applies - the dwelling was the sole or principal residence of any one or more of the persons referred to in subparagraphs (13)(d)(i) and (ii) during the whole or part of the period during which the deceased person owned the dwelling; and

(c) but for this section and subsection 160ZA(1) , a capital gain would have accrued to the taxpayer, or the taxpayer would have incurred a capital loss, in respect of the disposal,

a capital gain shall be deemed to have accrued to the taxpayer, or the taxpayer shall be deemed to have incurred a capital loss, as the case may be, in respect of the disposal of the dwelling, of an amount calculated in accordance with the formula

AB C

,

where:

A is the amount of the capital gain or of the capital loss, as the case may be, referred to in paragraph (c);

B is the sum of the following:

(d) the number of days (if any) in the relevant period during which the taxpayer owned the dwelling (disregarding section 160X), but the dwelling was not the taxpayer's sole or principal residence;

(e) if the deceased person acquired the dwelling on or after 20 September 1985 - the number of days (if any) in the period during which the deceased person owned the dwelling, but the dwelling was not the deceased person's sole or principal residence;

(f) the number of days (if any) in the period mentioned in paragraph (13)(d) during which the dwelling was not the sole or principal residence of any of the persons mentioned in subparagraphs (13)(d)(i) and (ii).

C is:

(h) in a case where the dwelling was acquired by the deceased person before 20 September 1985 - the number of days in the period from and including the date of the death of the deceased person to and including the day immediately before the date of the disposal; or

(j) in a case where the dwelling was acquired by the deceased person on or after 20 September 1985 - the number of days in the period from and including the date on which the dwelling was acquired by the deceased person to and including the day immediately before the date of disposal.

Note:

The number of days worked out under paragraphs (e) and (j) is modified in some cases: see subsection (20AA).

160ZZQ(17A)   [Beneficiary - partial exemption]  

Subject to subsections (20A) and (21) where:

(a) a dwelling owned by a taxpayer referred to in paragraph (13A)(a) is disposed of;

(aa) the disposal is not covered by subsection (13), (13A) or (14);

(b) either or both of the following subparagraphs is or are applicable:

(i) the dwelling was the sole or principal residence of the taxpayer during the whole or part of the period referred to in paragraph (13A)(b);

(ii) in a case to which paragraph (13A)(c) applies - the dwelling was the sole or principal residence of the deceased person referred to in that paragraph during the whole or part of the period during which the deceased person owned the dwelling; and

(c) but for this section and subsection 160ZA(1) , a capital gain would have accrued to the taxpayer, or the taxpayer would have incurred a capital loss, as the case may be, in respect of the disposal;

a capital gain shall be deemed to have accrued to the taxpayer, or the taxpayer shall be deemed to have incurred a capital loss, as the case may be, in respect of the disposal of the dwelling, of an amount calculated in accordance with the formula

AB C

,

where:

A is the amount of the capital gain or of the capital loss, as the case may be, referred to in paragraph (c);

B is the sum of the following:

(d) the number of days (if any) in the period from the deceased person's death to the disposal of the dwelling during which the dwelling was not the taxpayer's sole or principal residence;

(e) if the deceased person acquired the dwelling on or after 20 September 1985 - the number of days (if any) in the period during which the deceased person owned the dwelling, but the dwelling was not the deceased person's sole or principal residence.

C is:

(g) in a case where the dwelling was acquired by the deceased person before 20 September 1985 - the number of days in the period from and including the date of the death of the deceased person to and including the day immediately before the date of the disposal; or

(h) in a case where the dwelling was acquired by the deceased person on or after 20 September 1985 - the number of days in the period from and including the date on which the dwelling was acquired by the deceased person to and including the day immediately before the date of disposal.

Note:

The number of days worked out under paragraphs (e) and (h) is modified in some cases: see subsection (20AA).

160ZZQ(18)   [Beneficiary - partial exemption]  

Subject to subsections (20A) and (21), where:

(a) a dwelling owned by a taxpayer referred to in paragraph (14)(a) is disposed of;

(b) the disposal took place within 2 years after the date of death of the deceased person;

(c) the dwelling was the sole or principal residence of the deceased person referred to in paragraph (14)(a) during part only of the period during which the deceased person owned the dwelling; and

(d) but for this section and subsection 160ZA(1) a capital gain would have accrued to the taxpayer, or the taxpayer would have incurred a capital loss, in respect of the disposal;

a capital gain shall be deemed to have accrued to the taxpayer, or the taxpayer shall be deemed to have incurred a capital loss, as the case may be, in respect of the disposal of the dwelling, of an amount calculated in accordance with the formula

AB C

,

where:

A is the amount of the capital gain or of the capital loss, as the case may be, referred to in paragraph (d);

B is the number of days in the part of the period during which the deceased person owned the dwelling during which the dwelling was not the sole or principal residence of the deceased person; and

C is the number of days in the period during which the deceased person owned the dwelling.

160ZZQ(19)   [Trustee - partial exemption]  

Subject to subsections (20A) and (21), where:

(a) a dwelling owned by a taxpayer in the capacity of the trustee of the estate of a deceased person is disposed of;

(aa) the disposal is not covered by subsection (15);

(b) either or both of the following subparagraphs is or are applicable:

(i) the dwelling was the sole or principal residence of any one or more of the persons referred to in sub-subparagraphs (15)(b)(ii)(A) and (B), during the whole or part of the period referred to in subparagraph (15)(b)(ii);

(ii) in a case to which paragraph (15)(c) applies - the dwelling was the sole or principal residence of the deceased person during the whole or part of the period during which the deceased person owned the dwelling; and

(c) but for this section and subsection 160ZA(1) , a capital gain would have accrued to the taxpayer, or the taxpayer would have incurred a capital loss, as the case may be, in respect of the disposal,

a capital gain shall be deemed to have accrued to the taxpayer, or the taxpayer shall be deemed to have incurred a capital loss, as the case may be, in respect of the disposal of the dwelling, of an amount calculated in accordance with the formula

AB C

,

where:

A is the amount of the capital gain or of the capital loss, as the case may be, referred to in paragraph (c);

B is the sum of the following:

(d) the number of days (if any) in the period mentioned in subparagraph (15)(b)(ii) during which the dwelling was not the sole or principal residence of any of the persons mentioned in sub-subparagraphs (15)(b)(ii)(A) and (B);

(e) if the deceased person acquired the dwelling on or after 20 September 1985 - the number of days (if any) in the period during which the deceased person owned the dwelling, but the dwelling was not the deceased person's sole or principal residence.

C is:

(g) in a case where the dwelling was acquired by the deceased person before 20 September 1985 - the number of days in the period from and including the date of the death of the deceased person to and including the day immediately before the date of the disposal; or

(h) in a case where the dwelling was acquired by the deceased person on or after 20 September 1985 - the number of days in the period from and including the date on which the dwelling was acquired by the deceased person to and including the day immediately before the date of disposal.

Note:

The number of days worked out under paragraphs (e) and (h) is modified in some cases: see subsection (20AA).

160ZZQ(20)   [Trustee - partial exemption]  

Subject to subsections (20A) and (21), where:

(a) a dwelling owned by a taxpayer referred to in paragraph (15)(a) is disposed of;

(b) the disposal took place within 2 years after the date of death of the deceased person;

(c) the dwelling was the sole or principal residence of the deceased person referred to in paragraph (15)(a) during part only of the period during which the deceased person owned the dwelling; and

(d) but for this section and subsection 160ZA(1) a capital gain would have accrued to the taxpayer, or the taxpayer would have incurred a capital loss, in respect of the disposal,

a capital gain shall be deemed to have accrued to the taxpayer, or the taxpayer shall be deemed to have incurred a capital loss, as the case may be, in respect of the disposal of the dwelling, of an amount calculated in accordance with the formula

AB C

,

where:

A is the amount of the capital gain or of the capital loss, as the case may be, referred to in paragraph (d);

B is the number of days in the part of the period during which the deceased person owned the dwelling during which the dwelling was not the sole or principal residence of the deceased person; and

C is the number of days in the period during which the deceased person owned the dwelling.

160ZZQ(20A)   [Subsection which deems smaller gain or larger loss applicable]  

Where both subsections (17) and (18), both subsections (17A) and (18) or both subsections (19) and (20) would, but for this subsection, apply to a taxpayer in respect of the disposal of a dwelling owned by the taxpayer:

(a) if each of the subsections that would so apply has the effect of deeming a capital gain to have accrued to the taxpayer in respect of the disposal - only that subsection applies which deems the smaller capital gain to have accrued; or

(b) if each of the subsections that would so apply has the effect of deeming the taxpayer to have incurred a capital loss in respect of the disposal - only that subsection applies which deems the larger capital loss to have been incurred.

160ZZQ(20AA)   [Where dwelling was non-income producing residence]  

For the purposes of subsections (17), (17A) and (19), if, immediately before the death of the deceased person concerned, the dwelling concerned:

(a) was the deceased person's sole or principal residence; and

(b) was not being used for the purpose of gaining or producing assessable income;

then:

(c) the number of days mentioned in paragraphs (17)(e), (17A)(e) or (19)(e) (as appropriate) is taken to be nil; and

(d) the number of days mentioned in paragraphs (17)(j), (17A)(h) or (19)(h) (as appropriate) is worked out from and including the date of the death, instead of the date on which the deceased person acquired the dwelling.

160ZZQ(20B)   [Commissioner to determine exemption]  

Where:

(a) but for this subsection a capital gain would be deemed to have accrued to a taxpayer, or a taxpayer would be deemed to have incurred a capital loss, in respect of the disposal of a dwelling by the taxpayer; and

(b) the taxpayer owned the dwelling as the trustee of, or acquired the dwelling as a beneficiary in, the estate of a deceased person (in this subsection called the ``relevant deceased person'' ); and

(ba) subparagraph 160X(5)(a)(ii) does not apply to the taxpayer's acquisition of the dwelling;

then:

(c) in the case of a dwelling disposed of on or before 15 August 1989 - that capital gain is to be reduced or that capital loss is to be increased; or

(d) in the case of a dwelling disposed of after that date - that capital gain is to be increased or reduced or that capital loss is to be increased or reduced;

by such amount as the Commissioner considers appropriate to take into account the extent to which the dwelling was, during any period that occurred after 19 September 1985 and before the dwelling was acquired by the relevant deceased person, the sole or principal residence of any one or more of the following:

(e) any person who owned the dwelling at the time of his or her death;

(f) any person who, immediately before the death of a person referred to in paragraph (e), was the spouse of that person;

(g) any person who, under the will of a person, had a right to occupy the dwelling;

(h) any person who acquired the dwelling as a beneficiary in the estate of a deceased person.

160ZZQ(20C)   [Trustee acquired dwelling pursuant to a will]  

Subject to subsection (21), where, pursuant to the will of a deceased person, a taxpayer in the capacity of a trustee of the estate of the deceased person acquired a dwelling after 19 September 1985 for occupation by another person (in this subsection called the ``beneficiary'' ):

(a) if the taxpayer disposes of the dwelling to the beneficiary for no consideration:

(i) the taxpayer is not taken for the purposes of this Part other than this subsection to have disposed of the dwelling; and

(ii) the beneficiary is taken for the purposes of this Part to have acquired the dwelling on the date on which it was acquired by the taxpayer; and

(iii) the cost base, the indexed cost base or the reduced cost base to the beneficiary of the dwelling for the purposes of this Part includes any amount that would, if the taxpayer had disposed of the dwelling for the purposes of this Part at the time when ownership of the dwelling passed to the beneficiary, have been included in the cost base, the indexed cost base or the reduced cost base, as the case may be, of the dwelling to the taxpayer as a result of the taxpayer having incurred expenditure in respect of the dwelling; or

(b) if the taxpayer disposes of the dwelling to a person otherwise than as mentioned in paragraph (a):

(i) if the dwelling was the sole or principal residence of the beneficiary during the whole of the period from the time when the dwelling was acquired by the taxpayer to the time when it was so disposed of - a capital gain is not to be deemed to have accrued to the taxpayer, and a capital loss is not to be deemed to have been incurred by the taxpayer, as the case requires, in respect of the disposal of the dwelling; or

(ii) if the dwelling was the sole or principal residence of the beneficiary during part only of the period referred to in subparagraph (i) and, but for this section and subsection 160ZA(1) , a capital gain would have accrued to the taxpayer or the taxpayer would have incurred a capital loss, in respect of the disposal - a capital gain is to be deemed to have accrued to the taxpayer, or the taxpayer is to be deemed to have incurred a capital loss, as the case may be, in respect of the disposal of the dwelling, of an amount calculated in accordance with the formula

AB C

,

where:

A is the amount of the capital gain or of the capital loss, as the case may be, first mentioned in this subparagraph;

B is the number of days in the part of the period referred to in subparagraph (i) during which the dwelling was not the sole or principal residence of the beneficiary;

C is the number of days in the period referred to in subparagraph (i).

160ZZQ(20D)   [Disposal before first income time]  

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).

160ZZQ(21)   [Concurrent income-producing use]  

Where:

(a) a dwelling owned by a taxpayer is disposed of;

(b) but for this subsection, subsection (12), (13), (13A), (14), (15), (16), (17), (17A), (18), (19), (20) or (20C) would apply in respect of the disposal because the dwelling was, during a particular period, the sole or principal residence of the taxpayer or of another person; and

(c) the dwelling was, during the whole or a part of that period, also used for the purpose of gaining or producing assessable income,

that subsection does not apply in respect of the disposal of the dwelling but a capital gain shall be deemed to have accrued to the taxpayer, or the taxpayer shall be deemed to have incurred a capital loss, as the case may be, in respect of the disposal of the dwelling, of such amount as the Commissioner determines having regard to:

(d) if, apart from this subsection and subsection 160ZA(1) , a capital gain would be deemed to have accrued to the taxpayer, or a capital loss would be deemed to have been incurred by the taxpayer, in respect of the disposal of the dwelling - the amount of that capital gain or capital loss; and

(e) the extent to which, and the period for which, the dwelling was used in the first-mentioned period for the purpose of gaining or producing assessable income; and

(f) if subsection (13), (13A), (14) or (15) would have applied in respect of the disposal - the extent to which, and the period for which, the dwelling was used for the purpose of gaining or producing assessable income in the period during which both:

(i) the deceased person mentioned in whichever of those subsections would have applied owned the dwelling; and

(ii) the dwelling was the deceased person's sole or principal residence.

Note:

This paragraph means that, in determining the amount of the capital gain or capital loss, the Commissioner must have regard to certain use of the dwelling for the purpose of gaining or producing assessable income before the death. However, this rule is subject to subsection (22).

160ZZQ(22)   [When part of exemption period disregarded]  

If:

(a) apart from subsection (21), subsection (13), (13A), (14), (15), (17), (17A), (18), (19), (20) or (20C) would apply in respect of the disposal of a dwelling; and

(b) during all or part of the period (the exemption period ) mentioned in paragraph (21)(b), the dwelling was the sole or principal residence of the deceased person mentioned in whichever of those subsections would have applied; and

(c) immediately before the deceased person's death, the dwelling:

(i) was the deceased person's sole or principal residence; and

(ii) was not being used for the purpose of gaining or producing assessable income;

then:

(d) in having regard to the matter mentioned in paragraph (21)(e), the Commissioner must disregard so much of the exemption period as occurred before the death; and

(e) paragraph (21)(f) does not apply in respect of the disposal.

Note:

This means that, in determining the amount of the capital gain or capital loss under subsection (21), the Commissioner must disregard any use of the dwelling before the death for the purpose of gaining or producing assessable income.

160ZZQ(23)   [An instant in time]  

To avoid doubt, for the purposes of subsection (21), a period may consist of a particular instant in time.