Private ruling: CGT - main residence exemption
Date of advice: 29 September 2025
Published: 17 November 2025
Ruling period: DD MM YY
Date scheme commenced: DD MM YY

Ruling: Q1: Can you disregard any capital gain or loss you make on disposal of the property at XXXX? | A1: No.

Relevant facts and circumstances: You and person B are citizens of Country A. On DD MM YY, you and person B entered into a contract to purchase a vacant block of land in City A, Australia. The purchase price was $XXXX. On DD MM YY, you and person B paid a deposit for the property in City A. On DD MM YY, person B informed person C's school in Country A that you were moving to City A. On DD MM YY, you and person B paid for preliminary building plans for the property in City A. On DD MM YY, person B arrived in Australia via VISA XX. Person B stayed with person D in City B. On DD MM YY, you arrived in Australia via VISA XX. You stayed with Person B and Person D in City B. On DD MM YY, person D's house caught fire. You, person B, and person D then had to move into a temporary rental property in City B on DD MM YY. On DD MM YY, you and person B entered into a building contract to build a house at the City A property. On DD MM YY, person B attended an online interview for a position in City A. On DD MM YY, person B enrolled your person E into a daycare centre in City A. On DD MM YY, you were offered a job position in City A. On DD MM YY, settlement occurred for the acquisition of the City A property. Shortly after, on DD MM YY, you and person B discovered that person D had received a dire prognosis which required you and your family to remain in City B (instead of relocating to City A) to assist with their care. You and person B decided to sell the vacant land in City A. On DD MM YY, the City A property was placed on the market for sale. On DD MM YY, you and person B cancelled the building contract for the City A property. On DD MM YY, you and person B placed an offer to buy a property in City B. On DD MM YY, you and person B received an offer on the City A property. On DD MM YY, the contract settled on the property in City B, and you and person B moved in. The mortgage for the City B property was acquired as a bridging loan on the pending sale of the City A property. On DD MM YY, you and person B entered into a contract to sell the City A property for $XX. On DD MM YY, settlement occurred for the disposal of the City A property.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-135 | Income Tax Assessment Act 1997 section 118-150

Reasons for decision: Summary: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or capital loss results from a CGT event occurring. The most common capital gains tax (CGT) event, CGT event A1, occurs when you dispose of a CGT asset to someone else. For example, if you sell a property. Land and dwellings are CGT assets. Under section 118-110 of the ITAA 1997, you can generally disregard any capital gain or capital loss from a CGT event that happens to a dwelling that is your main residence for the entire period you owned it when: • the dwelling was your home for the whole period you owned it; • the dwelling was not used to produce assessable income; and • any land on which the dwelling is situated is not more than two hectares. You are only able to treat one dwelling as your main residence at any time (apart from limited circumstances where you are changing main residences). You only get a partial exemption for a CGT event that happens in relation to your ownership interest in a property if the dwelling was your main residence for only part of your ownership period. Section 118-135 of the ITAA 1997 provides "If a dwelling becomes your main residence by the time it was first practicable for you to move into it after you acquired your ownership interest in it, the dwelling is treated as your main residence from when you acquired the interest until it actually became your main residence." Whether the dwelling becomes the taxpayer's main residence as soon as practicable depends on the facts of each case. The extension of the main residence exemption will not apply in the situation where a taxpayer purchases a property with the intention of occupying it as their main residence but never actually occupies the property ( Couch and Commissioner of Taxation [2009] AATA 41) (Couch's case). In Couch's case, the taxpayers acquired a property in 2000 with the intention of residing in it as their matrimonial home. However, due to employment circumstances, the property was rented out until it was sold in 2006, without the taxpayers having resided in it. The Administrative Appeals Tribunal (AAT) held that the fact that the property was continually being leased and was not being occupied by the taxpayers because of employment circumstances was not enough to invoke section 118-135 of the ITAA 1997. There are limited situations that enable the main residence exemption to be extended to vacant land, for those to apply there must be a dwelling that you have resided in during your ownership period. Section 118-150 of the ITAA 1997 provides that the main residence exemption may be applied to land retrospectively for a maximum period of four years, provided that: • a dwelling is actually constructed on the land, • you move into the dwelling as soon as practicable after the construction is finalised; and • it continues to be your main residence for at least three months. The mere intention to construct a dwelling or to occupy a dwelling as a sole or principal residence, but without actually doing so, is insufficient to obtain the main residence exemption. | Detailed Reasoning - Application to your circumstances: In your case, you and person B purchased vacant land in City A, Australia. Your intention was to build a house and move into the City A property, but this did not eventuate. Instead, you purchased a house in City B and moved there. The laws relating to capital gains tax do not give the Commissioner any discretionary powers to disregard the capital gain or capital loss made on the sale of vacant land where the individual intended to build a dwelling as their main residence but fails to do so due to factors outside their control such as illness to a family member. The mere intention to construct a dwelling on vacant land as your principal place of residence, but without actually doing so, is insufficient to apply section 118-110 of the ITAA 1997 to the sale of the vacant land. Also, the requirement of section 118-135 of the ITAA 1997 cannot be met if no dwelling exists to move into. As the Commissioner has no discretion to disregard any capital gain or capital loss and you are unable to apply section 118-110 of the ITAA 1997, you are not entitled to claim any main residence exemptions on the sale of the vacant land. Therefore, the land that you and your spouse owned is a CGT asset and a CGT event happened to it when you disposed of it. As it was not your main residence for any part of the ownership period you will not be entitled to an exemption from CGT. As you owned the land with person B, any net capital gain or loss resulting from its disposal will be shared with person B based on your respective ownership interests. When you sell or otherwise dispose of an asset, you can reduce your capital gain by 50%, if both of the following apply: you owned the asset for at least 12 months you are an Australian resident for tax purposes. This is called the capital gains tax (CGT) discount. The full CGT discount cannot be used for capital gains made by foreign or temporary residents after 8 May 2012. However, you may get an apportioned discount on capital gains if you had a period of Australian residency during your ownership of the asset.