Private ruling: CGT - Main residence exemption
Date of advice: 28 November 2017
Published: April 2018
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you entitled to the CGT main residence exemption on the sale of the land? | A1: No.

Relevant facts and circumstances: You purchased a block of land, with the intent to build your main residence. There was a sunset clause in your contract, this was extended and then extended again. More than two years later a class action was undertaken for the land title to be transferred to the purchasers. The court decision was finalised two years later. The land was finally registered more than four years after the land was purchased. Due to the delays you encountered with the land, you decided to acquire another piece of land elsewhere and you are currently in the process of building your main residence. You are planning on selling the first block of land in the coming months.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-110 and | Income Tax Assessment Act 1997 Section 118-150.

Reasons for decision: Summary: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you can disregard any capital gain or loss realised on the disposal of a dwelling that was your main residence for your entire ownership period. If you build, repair or renovate a dwelling, section 118-150 of the ITAA 1997 can apply to treat the dwelling you are building, repairing or renovating on the land as your main residence from the time you acquired your ownership interest. Subsection 118-150(3) of the ITAA 1997 specifies that you can make this choice only if: (a) a dwelling on the land that you construct, repair or renovate becomes you main residence as soon as practicable after the work is finished; and (b) it continues to be your main residence for at least three months. Subsection 118-150(4) of the ITAA 1997 provides a time limit during which this choice can operate. It is the shorter of: (a) four 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. In your case, you purchased a block of land with the intention to build your main residence on it. After encountering multiple issues and delays with the developer, you are now going to sell the land. To apply the CGT main residence exemption, a dwelling needs to be your main residence. Accordingly, the main residence exemption cannot apply to the disposal of your land.