Private ruling: CGT - main residence
Date of advice: 20 May 2026
Published: 3 August 2026
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Will the Commissioner exercise discretion to extend the four-year time period under section 118-150 of the Income Tax Assessment Act 1997 in relation to the dwelling? | A1: Yes.

Relevant facts and circumstances: A few years ago, you and your spouse purchased a parcel of land. The parcel of land held expired subdivision approval. From the outset, your primary intention was to build your family home on a portion of the land. To help finance the subdivision and eventual construction of your residence, you completed the subdivision and sold some of the parcels of land. These lots were treated as revenue assets, and you declared the proceeds as assessable income and paid GST and income tax accordingly. One lot remains in your ownership. The remaining lots have always been held for private use, and you continue to treat them as capital assets forming your main residence. The subdivision process involved extensive and unanticipated delays, including: • Upgrading and connecting to reticulated sewer, • Construction of a laneway and access road, • Major earthworks and reshaping of the site, • Installation of utility services to five new titles, • Updated engineering and environmental compliance processes. The subdivision process took a couple of years. After the sub-division was completed, you undertook design and planning for a sustainable residence. The design and planning phase was significantly delayed due to: • Coastal and bushfire overlay requirements, • Builder shortages and rising construction costs, • Revisions to design and compliance documentation. Throughout your ownership, a number of lots have remained dedicated to the construction of your main residence. The land has never been used for income-producing purposes. The property is less than 2 hectares in size. Completion of the property occurred a few months ago. You and your spouse moved into the property shortly after completion. You have moved into the property and commenced treating it as your main residence. You have treated the property as your main residence for a few months.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-150

Reasons for decision: Summary: Section 118-150 of the Income Tax Assessment Act 1997 (ITAA 1997) extends the Capital Gains Tax (CGT) main residence exemption to allow you to treat land as your main residence if you build, repair or renovate a dwelling on the land that subsequently becomes your main residence. Relevantly, subsection 118-150(1) of the ITAA 1997 applies to land that you own if you build a dwelling on the land. Under subsection 118-150(2) of the ITAA 1997 you can choose to apply the main residence exemption as if the dwelling that you are building were your main residence from the time you own the land. Subsection 118-150(3) of the ITAA 1997 provides you can make the choice only if, relevantly: a) a dwelling on the land that you construct becomes your main residence as soon as practicable after the work is finished; and b) it continues to be your main residence for at least 3 months. Subsection 118-150(4) of the ITAA 1997 provides a time limit during which the choice can operate. This is the shorter of: a) 4 years, or a longer time allowed by the Commissioner, before the dwelling becomes your main residence; and b) The period starting when you acquired your ownership interest in the land and ending when the dwelling becomes your main residence. Subsection 118-150(5) of the ITAA 1997 states if there was already a dwelling on the land when you acquired your ownership interest and you or someone else occupied it after that time, the period in Subsection (2) and paragraph (4)(b) starts when the dwelling ceased to be occupied. Subsection 118-150(6) of the ITAA 1997 states once you make the choice, no other dwelling can be treated as your main residence during the period referred to in subsection (4), except if section 118-140 (about changing main residences) applies. In this Ruling, section 118-140 doesn't apply. The Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No. 2) Bill 2011 states the Commissioner may exercise the discretion in situations such as the following: • When you are unable to build, repair or renovate the dwelling within this period due to circumstances outside your control. For example, the relevant builder becomes bankrupt and is unable to complete the building, repairs or renovations. • When you are unable to build, repair or renovate the dwelling due to unforeseen circumstances arising during this period. For example, you or a family member has a severe illness or injury. • When building, repairing, or renovating the dwelling within four years would impose a severe financial burden on you. For example, you would be required to incur an excessively high level of debt relative to your income. Consequently, you may spend time accumulating sufficient savings (relative to your income) to build, repair or renovate a reasonable dwelling relative to your circumstances. These examples are not exhaustive. | Detailed Reasoning - Application to your circumstances: In your case, the sub-division of the land and the subsequent build of your main residence was not completed within the four year timeframe due to various circumstances outside of your control including delays in getting the sub-division completed, various issues and delays with upgrading and connecting to reticulated sewer, construction of a laneway and access road, major earthworks and reshaping of the site, installation of utility services to the new titles, updated engineering and environmental compliance processes. Once the sub-division was completed there were delays with the design and planning your main residence which consisted of coastal and bushfire overlay requirements, builder shortages and rising construction costs, revisions to design and compliance documentation. Therefore, based on the facts provided, the Commissioner will exercise the discretion under paragraph 118-150(4)(a) of the ITAA 1997 to allow the property to operate as your main residence for the period of ownership prior to it becoming your main residence.