Private ruling: Capital gains tax - main residence exemption - vacant land
Date of advice: 14 November 2025
Published: 5 January 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: XX August 20XX

Ruling: Q1: Will the capital gain made on the disposal of your property be disregarded? | A1: No.

Relevant facts and circumstances: On XX August 20XX Person A and Person B (You) purchased a property in Australia (The Property). The property was vacant land except for a structure on the corner, which remained untouched with an easement established around it. You planned to build a home on the Property to live in. You had plans drawn up and lodged a development application. On XX November 20XX the plans and the development application were approved. Due to a change in your circumstances, you sold the Property before building and occupying the home. On XX February 20XX settlement for the Property occurred. You made a capital gain on the disposal of the Property.

Relevant legislative provisions: Income tax Assessment Act 1997 section104-10 | Income tax Assessment Act 1997 section118-110

Reasons for decision: Summary: A capital gain or capital loss may arise if a capital gains tax event (CGT event) happens to a capital gains tax asset (CGT asset). The most common CGT event is CGT event A1 and this occurs when an entity disposes of the ownership interest in an asset. The sale of vacant land would be considered to be a CGT event A1. Under certain circumstances, you may be able to disregard a capital gain or capital loss that is made on the sale of an asset. For example, you can ignore a capital gain from a CGT event that happens to a dwelling that is your main residence. The exemption is also extended to include up to 2 hectares of land that is adjacent to the dwelling. However, the main residence exemption can only be applied to land owned by a taxpayer if the taxpayer sells the land as part of the sale of a dwelling. That can include situations where a taxpayer builds a dwelling on the land or repairs, renovates or finishes building a dwelling on the land, and then moves into the completed dwelling. The only time that the main residence exemption applies to the sale of vacant land is where it is sold after the accidental destruction of a main residence that was sited on it. There are no other provisions that provide an exemption for a capital gain or capital loss due to the sale of vacant land, and there is no discretion available to the Commissioner to allow a main residence exemption on the sale of vacant land. A mere intention to construct a dwelling as your main residence without actually doing so is insufficient to obtain the exemption. In your case CGT event A1 occurred when you disposed of the vacant land. Regardless of the intentions that you held when you bought the block of land, you are not selling a dwelling with the land, nor are you selling a vacant block of land on which an existing dwelling was destroyed. As you do not meet any of the necessary conditions to be eligible for any of the exemptions on the disposal of vacant land, you will not be able to disregard any capital gain made on the disposal of the vacant land. Therefore, you must include any capital gain made on the disposal of the vacant land in your income tax returns for the year ended 30 June 20XX. A capital gain can be reduced by applying the CGT discount of 50% for assets owned for at least 12 months.