Private ruling: Main residence exemption - over 4 years to build
Date of advice: 25 May 2022
Published: August 2022
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion under section 118-150 of the Income Tax Assessment Act 1997 to extend the 4-year time period for the dwelling to become your main residence? | A1: Yes, having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time under section 118-150 for you to occupy the dwelling as your main residence. Further information about this discretion can be found by entering 'QC 66034' into the search bar at ato.gov.au

Relevant facts and circumstances: Some time ago you purchased a vacant block of land with the intention of building your future home. Approximately 12 months later you signed a Home Building Contract with Person A for the construction of a dwelling at the property. According to the contract the builder should complete the construction within 48 weeks. At the same time home warranty insurance certificate was issued by Company Z and the certifier issued a Notice of Commencement of Building Works. Approximately 2 years after the Home Building Contract was signed, Person A ceased work and left the dwelling uninhabitable and littered with defects. Person A failed to provide outstanding documents required by the building certifier. At that stage it was impossible to obtain an interim Occupation Certificate as the dwelling did not meet the minimum requirement for occupation. A short time later lawyers were engaged to take legal action against the builder for breach of contract. Sometime later a building inspection report was provided by an accredited building expert. Following a site inspection many items were listed as either defects or incompletions. Lawyers informed you that Person A filed for bankruptcy. Therefore, instead of going through a civil and administrative claims tribunal you were advised that you should lodge claims to Company Z. Lawyers helped you lodge a claim to Company Z providing all the evidence including a building report of all the defects and incompletions as well as an engineer's inspection report suggesting the installation of a steel column to address the defects of external and internal cracking. Nearly one year after you lodged the insurance claim, Company Z issued the settlement letter accepting various items of defects and incompletions for compensation. Shortly after the insurance was completed a remedial builder was contracted to complete the rest of the building work listed in Company Z's compensation list. Five months later the remedial builder completed all the building work. For the next four months final inspections regarding stormwater compliance, glass safety compliance and structural compliance were made to fulfill the requirements for the issue of an Occupation Certificate. Shortly after final inspections were made an Occupation Certificate was issued. Your spouse and your child moved into the dwelling with you. All of your belongings were moved into the dwelling. All of your mail was sent to the address of the dwelling. You have provided the follow information addressed to the dwelling in either your name, your spouse's name, or both: • Club membership • Electricity account • Home insurance • Motor vehicle registration notice • Private school statement of account • Bank statement for the period. It was your intention to occupy the dwelling as your main residence. You occupied the dwelling as your main residence for longer than three months. Since you moved into the dwelling, you have noted the poor building quality and defects which were caused by the previous builder's substandard practice. Consequently you have decided to sell the dwelling. Six years and nine months after the land was purchased the dwelling was sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-150