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Tuesday, 25 November 1986
Page: 3706

Mr Keating —On 21 October 1986 (Hansard, page 2404), Mr Reith asked me, without notice, the following question:

I refer the Treasurer to the many small business proprietors, farmers and journalists amongst others, who use a room in their homes at night and on weekends either to write up their books or otherwise attend to their business affairs. Is it the intention of the capital gains tax to apply to the family home in those circumstances? Will the Treasurer request the Commissioner of Taxation to issue a ruling providing guidelines on how he will exercise the discretion given to him in calculating the tax in these circumstances?

I now provide the following answer to the honourable member's question:

If part of a taxpayer's principal residence is used to conduct a business-for example, where a shop is attached to a dwelling, or where a doctor's surgery is part of a dwelling-the principal residence exemption does not extend to that part of the building for the time it was so used. However, in the many cases where a study in a principal residence is used for work merely because it is inconvenient for the work to be done at the taxpayer's normal place of work-and in these cases, the taxpayer is unable to claim income tax deductions for expenses such as interest or home insurance-the home is not regarded as being used for the purpose of gaining or producing assessable income. Accordingly, the home would remain fully eligible for the principal residence exemption.

As well as publishing a booklet explaining various aspects of the capital gains provisions, including their application in relation to a taxpayer's principal residence, the Commissioner has issued, and will continue to issue, rulings clarifying issues raised by taxpayers in relation to the interpretation and operation of these provisions.