Private ruling: Main Residence Exemption
Date of advice: 10 March 2026
Published: 28 April 2026
Ruling period: DD MM YYYY

Ruling: Q1: Will the Commissioner exercise the power under paragraph 118-150(4)(a) of the Income Tax Assessment Act 1997 to allow the choice, related to the dwelling to operate for 7 years instead of the usual 4 years? | A1: Yes.

Relevant facts and circumstances: 1. The Applicants acquired the Property as joint tenants on DD MM YYYY for $xxx. 2. The Applicants acquired the Property with the sole intention of demolishing the existing dwelling and constructing a new dwelling to serve as their main residence. 3. The development period for the Property spanned approximately X years from acquisition to completion. 4. Below is the timeline of events: • Construction Commencement: Demolition was permitted on DD MM YYYY. Major construction works commenced on DD MM YYYY (Stage 1). • Completion: Construction reached practical completion on or around DD MM YYYY, when the Occupancy Permit was issued. • Residency: The Applicants moved into the Property immediately following completion of construction in MM YYYY. They established the dwelling as their main residence and continued to reside there for approximately X years, until MM YYYY. 5. The Applicants entered into a contract to sell the Property on DD MM YYYY for $xxx with settlement occurring on DD MM YYYY and anticipated a gross capital gain of approximately $xxx. 6. The Applicants lived in Property X prior to moving into the Property and returned to live at this address after selling the Property. Circumstances causing delay 7. The construction of the dwelling on the Property was significantly delayed due to a combination of unforeseen complexities and events outside the Applicants' control. 8. The planning phase took approximately 2 years, significantly longer than the standard timeframe for residential permits. This involved: • Consultant engagement: the Applicants acted promptly, engaging architects and town planners in MM YYYY, one month after settlement. • Objections: the issuance of the planning permit was stalled due to objections lodged by adjoining owners regarding the proposed development. • Council delays: The dispute required referral to a formal council meeting, causing further procedural delays outside the Applicants' control. The planning permit was not issued until DD MM YYYY. 9. There were unforeseen site complexities and engineering constraints. The specific geological and physical constraints of the site necessitated a 'commercial grade' build rather than a conventional domestic construction, rendering standard timelines between 9 to 12 months impossible. This involved: • Water table restrictions: the Property is located within a designated water table area. This required excavation works to be staged strictly around tidal movements to prevent water ingress. Excavation could only occur during low-tide windows, drastically reducing available working hours and extending the basement construction timeline. • Structural protection of neighbouring properties: the sensitivity of adjoining buildings required the installation of wall props and continuous monitoring for structural movement, slowing the pace of works. • Complex staging: due to the engineering complexity, building permits had to be split into two stages (Stage 1 for retention/basement in MM YYYY and Stage 2 for above-ground in MM YYYY) to allow site progress while documentation was finalised. 10. The construction phase coincided with the COVID-19 pandemic. This involved: • Labour restrictions: Government-mandated lockdowns and site density limits during YYYY and YYYY restricted the number of tradespeople allowed on site, slowing progress. • Material shortages: global supply chain disruptions prevented the timely procurement of essential materials, specifically specialist steelwork and glazing. • Critical equipment delay: the installation of the commercial-grade lift was delayed over 6 months due to overseas freight bottlenecks cause by the pandemic. Development Timeline Table 1: Development timeline Event Details Property Purchase Property Settled New titles Issued Consultant Engagement Architect Consultant Engagement Town Planners Planning Permit Issuance Demolition Permit Insurance Construction Commencement Stage 1 - Building Permit - Site Retention & Bulk Excavation Construction Commencement Stage 2 - Building Permit - Construction of Dwelling COVID Delayed Stages of Construction Construction Completion Occupancy Permit Issued

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 118-150(4)(a)

Reasons for decision: Summary: 11. Yes. The Commissioner will exercise the power under paragraph 118-150(4)(a) to allow the choice to operate for 7 years because the building was delayed by circumstances outside of the Applicants' control. | Detailed Reasoning - Detailed reasoning: All legislative references are to the Income Tax Assessment Act 1997 unless otherwise indicated. 12. Section 118-150 provides that if you build, repair or renovate a dwelling, you can choose to apply this Subdivision as if the 'dwelling that you are building, repairing or renovating on the land were your main residence from the time you acquired the ownership interest'. 13. There is a time limit during which the choice can operate. It cannot exceed 4 years unless the Commissioner allows more time (subsection 118-150(4)). 14. The development of the Property took approximately X years from acquisition to completion. 15. The development was delayed due to several unforeseen events, including: • objections to the plan, which delayed planning approval: • site-specific engineering complexities and • COVID-19, which coincided with the construction phase. 16. The Applicants were unable to build the dwelling within 4 years due to unforeseen circumstances outside of their control. Therefore, the Commissioner would exercise the discretion under paragraph 118-150(4)(a) to allow the choice to operate for 7 years. 17. For completeness, we note that this Ruling does not consider whether the Property was the Applicants' main residence or whether the proceeds from its sale ought to be included in assessable income. The Ruling only determines that the choice provided for in section 118-150 can operate for 7 years, instead of the usual 4 years.