Private ruling: Capital gains tax - main residence exemption
Date of advice: 12 February 2020
Published: May 2020
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you eligible for a main residence exemption upon the sale of vacant land at XXXX? | A1: No

Relevant facts and circumstances: In XXXX 20XX, you bought a block of vacant land with your spouse at XXXX. The purchase price of the vacant land was $XXXX. In XXXX 20XX, your spouse was diagnosed with XXXX and commenced treatment for this. You had planned to build a house on the vacant land but after your spouse was diagnosed, you decided to sell the vacant land. On XXXX 20XX, you sold the vacant land at XXXX. You sold the vacant land at XXXX for $XXXX. On XXXX 2018, you purchased a home at XXXX. This home is now your main residence.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 115 | Income Tax Assessment Act 1997 subsection 118-110(1) | Income Tax Assessment Act 1997 section 118-115

Reasons for decision: Summary: There are no exemptions under the capital gains tax provisions that would enable you to disregard the capital gain made on the sale of vacant land at XXXX. | Detailed Reasoning - Detailed reasoning: A capital gain or capital loss may arise if a capital gains tax (CGT) event happens to a CGT asset. In your circumstance, CGT event A1 occurred when you sold the vacant block of land at XXXX. When a CGT asset is acquired before 20 September 1985, any capital gains made on the sale of vacant land may be disregarded. However, you purchased the land after 20 September 1985. Therefore, you will be liable for any capital gain made unless an exemption applies. | Detailed Reasoning - Main residence exemption: Section 118-110 (1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or capital loss by an individual from a CGT event that happens in relation to a dwelling is disregarded if the dwelling was their main residence throughout their ownership period. Section 118-115 of the ITAA 1997 defines a dwelling to include: (a) unit of accommodation that: i) is a building or is contained in a building; and ii) consists wholly or mainly of residential accommodation; and b) a unit of accommodation that is a caravan, houseboat or other mobile home; and c) any land immediately under the unit of accommodation. For the exemption to apply, therefore, there must be a dwelling on the property. In your circumstances, you had an intention to build a dwelling on the land at XXXX. However, due to a change in your spouse's health, you decided not to build on the land but instead to sell the land. Therefore, you are not eligible for a main residence exemption on the sale of land at XXXX. You may be eligible for a discount capital gain on the sale of the vacant land as you have held the CGT asset for at least twelve months.