Residency requirement for CGT home exemption failed
The Administrative Appeals Tribunal (AAT) has affirmed the Commissioner's decision denying a taxpayer's claim for the CGT main residence exemption in relation to the disposal of a property.
Background
The taxpayer submitted that he had purchased the property in July 2002 with his then de facto partner. The construction of a house on the property commenced in April 2004; however, his relationship with his partner ended in September 2004. In approximately May or June 2005, he and the 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 $114,675 on the sale of the property was included as income in the taxpayer's notice of assessment for the 2005–2006 income year. The taxpayer disputed the inclusion of the capital gain on the basis that he was entitled to the CGT main residence exemption under Subdiv 118-B of the Income Tax Assessment Act 1997 (ITAA 1997). Prior to the hearing, the taxpayer provided the Commissioner with documentary evidence of certain construction, holding and sale costs, which the Commissioner accepted; this reduced the net capital gain to $66,271. The Commissioner had issued a penalty assessment (for around $31,900); however, the Commissioner allowed the taxpayer's objection to the penalty in full.
Decision
The AAT held that 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 also failed to establish that the house continued to be the taxpayer's main residence for at least three months after that time, as required by s 118-150(3)(a) and (b) of the ITAA 1997.
The AAT noted an email the taxpayer had sent to the ATO, which indicated that he had moved out of the house in the first week of September 2005 and this left open the possibility that he lived in the house for a period of less than three months. The AAT also noted that the taxpayer had not provided evidence (such as a certificate of occupancy) that the house became his main residence "as soon as practicable" after the completion of the house. Further, it noted that there was no evidence of any gas or electricity accounts for the house in the taxpayer's name.
Although the taxpayer claimed he moved his personal belongings into the house when he moved into it around May or June 2005, the AAT said the evidence indicated that the taxpayer's main residence was his sister's home in Queensland (and not the house) from at least the time of his separation from his ex-partner in September 2004. Other factors noted by the AAT included: from 2002 to September 2005, the taxpayer worked as a mine worker on a fly-in fly-out basis, which involved working two weeks on and one week off; in October 2004, the taxpayer redirected his mail to the Queensland address; in December 2004, the taxpayer obtained a Queensland driver's licence (which nominated the Queensland address as his residential address); and in the taxpayer's 2004–2005 income tax return, the taxpayer nominated the Queensland address as his home address.
Accordingly, the AAT held that the taxpayer had failed to discharge the burden of proof that the assessment should not have been made or should have been made differently.
Re Keep and FCT [2013] AATA 709, www.austlii.edu.au/au/cases/cth/AATA/2013/709.html.
