Written

For

The

Australian

-

Property

flippers

find

little

joy

as

ATO

moves

to

cool

CGT

hopes

Could an 86-year-old widow from Sydney's south really outfox the ATO in a David-versus-Goliath tax battle? Jenifer Bowerman did exactly that — and the Tax Office has just released its "decision impact statement" telling the rest of us not to get too excited.

Here's the backstory. After her husband passed away in 2015, Mrs Bowerman bought an off-the-plan apartment to downsize into. When construction was delayed, she bought a second apartment in the same complex as an interim home, planning to sell it for a profit once her dream apartment was ready. COVID intervened, and she copped a $265,936 loss instead. She claimed it as a tax deduction, the ATO said no, and the Administrative Appeals Tribunal sided with her.

The tribunal accepted that her purchase was a "commercial transaction" with a "profit-making purpose" under the 1987 Myer Emporium principle — ironically, an ATO win she used against them.

Personally, I think the decision raises eyebrows. Would a genuine business person offload an investment at a bad moment to fund a personal purchase? Would they hold for just two years, given transaction costs? And here's the question we'll never get answered: had she made a big gain instead of a loss, would she have volunteered to pay income tax on it? I doubt it.

The bigger message from the ATO's statement is twofold. First, the family home CGT exemption isn't going anywhere — that sacred tax break remains intact. Second, and this is where it gets interesting, property flippers should be paying attention. The same Myer Emporium principle that helped Bowerman could be turned against serial renovators who buy, move in, spruce up and sell within a short window.

If you've been treating your "principal place of residence" as a rolling tax-free profit machine, the ATO may soon start asking uncomfortable questions.