Free latrine with empty space (5)

I believe the answer is:

loose

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'free' is the definition.
(I know that free can be written as loose)

'latrine with empty space' is the wordplay.
'latrine with' becomes 'loo' (I can't explain this - if you can you should give a lot more credence to this answer).
'empty' suggests removing the centre.
'space' with its middle removed is 'se'.
'loo'+'se'='LOOSE'

Can you help me to learn more?

(Other definitions for loose that I've seen before include "untidy" , "Slack; not exact" , "Liberal" , "Unrestrained" , "Unrestricted" .)

I've seen this clue in the Sydney Morning Herald.

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