Loading
This thread is archived and the information may not be up-to-date. You can't reply to this thread.
rlhowarth(Newbie)Newbie
5 May 2023

I am hoping to see if I am correct with my understanding of the relevant available tax rules.


If a property that was purchased in 2004 as a main residence is then used for income producing purposes as an investment property in 2007 my understanding is the following can be applied:


  • According to ITAA 1997 s118-192 (2), special rule for main residence first use to produce income, "You are taken to have acquired the dwelling or your ownership interest at the income time for its market value at that time.


So in 2007 the market value is the new cost based and the reset acquisition date.


In 2016 the property is subdivided into 3 lots and investment units built on each new titled lot which are also rented out.


One of these units is then sold, so a capital gain is crystallised.


When determining cost base of subdivided properties is states the acquistion date is the date of the original purchase. However in this scenario, we are taken to have acquired the property when it was first used for income producing purposes at the market value at that time (2007).


With land and main residence property holdings, the above special rule doesn’t apply so in the event of subdivision the land acquisition has to be the original date of purchase – the original acquisition.


I cant see any scenarios or examples that show the cost base requirements when a subdivided property has also been eligible for the special ruling allowing the cost base reset?


410 views
2 replies
410 views
2 replies

Most helpful response

Most helpful reply

Bruce4Tax(Taxicorn)Taxicorn
6 May 2023

When determining cost base of subdivided properties is states the acquistion date is the date of the original purchase.


Yes - because when you subdivide, the parts that are separated from the main residence are deemed to be never a part of the main residence.


With land and main residence property holdings, the above special rule doesn’t apply so in the event of subdivision the land acquisition has to be the original date of purchase – the original acquisition.


Yes, but you will get a partial main residence exemption.


If the original main residence was retained, then you would get the "date first rented" valuation re-done main residence - now with reduced land area.


You need proper advice relevant to your facts.


All replies

Most helpful reply

Bruce4Tax(Taxicorn)Taxicorn
6 May 2023

When determining cost base of subdivided properties is states the acquistion date is the date of the original purchase.


Yes - because when you subdivide, the parts that are separated from the main residence are deemed to be never a part of the main residence.


With land and main residence property holdings, the above special rule doesn’t apply so in the event of subdivision the land acquisition has to be the original date of purchase – the original acquisition.


Yes, but you will get a partial main residence exemption.


If the original main residence was retained, then you would get the "date first rented" valuation re-done main residence - now with reduced land area.


You need proper advice relevant to your facts.


rlhowarth(Newbie)Newbie
6 May 2023

Thank you for your reply, I appreciate your time doing so.


I dont think I have been clear though with my question.


It really has nothing to do with a main residence exemption. Whilst the property was purchased in 2004 as a main residence it became a CGT asset in 2007 when it was converted to an investment property. At this time, in 2007, eligibility was met to apply the ITAA 1997 s118-192 (2), special rule for main residence first use to produce income. So the date of acquisition and therefore cost base was reset at this time to the market value of the property.


If we sold the property from 2007 on, our cost base would be the new 2007 date where it is taken to have acquired the dwelling or your ownership interest at the income time for its market value at that time.


Move forward to 2017 and the property was subdivided into three and three units were build - all rented for 5 years plus. One unit is then sold and a CGT calculation is required and the cost base of the subdivided land is the original acquisition cost.


In this case, the acquisition cost is the 2007 cost base where the property cost base was reset to have been acquired at this time. I cant see anything that excludes or says that ITAA 1997 s118-192 (2) cant no longer be applied or is overruled in any circumstance.


In all ATO guidance, examples, etc it is only referenced to subdividing a main residence or land holding that has never been eligible to apply ITAA 1997 s118-192 (2) so these examples never had the benefit of the special cost base reset rule. There are no rulings I could find relating to this particular scenario at all other than ones that discuss a farm that is then subdivided.


Ive received conflicting advice from tax agents, one saying ITAA 1997 s118-192 (2) is upheld and we are taken to have acquired the property in 2007. One saying that it cant be upheld and we lose the special rule and must use the 2004 cost base.


Im just trying to confirm that ITAA 1997 s118-192 (2) is upheld and we can use the 2007 date as the acquisition date.





Featured articles

Renting out all or part of your home? What to include in your tax return

21 May 2026 · 4 min read time

How to work out your tax residency

15 Apr 2026 · 8 min read time

Top liked users

  1. Taxduck

    (Taxicorn)

    1316 likes

  2. Bruce4Tax

    (Taxicorn)

    1121 likes

  3. YellowPotato

    (Taxicorn)

    356 likes

  4. Ken_Oath

    (Master)

    199 likes

  5. knaresbro

    (Devotee)

    141 likes

Top contributors

  1. Bruce4Tax

    (Taxicorn)

    3402contributions

  2. Taxduck

    (Taxicorn)

    2869contributions

  3. YellowPotato

    (Taxicorn)

    928contributions

  4. knaresbro

    (Devotee)

    295contributions

  5. TobyJDodd

    (Devotee)

    176contributions

Loading
How to determine date of acquisition for sale of a subdivided block | ATO Community