Private ruling: CGT - main residence exemption
Date of advice: 19 May 2025
Published: 21 July 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

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

Relevant facts and circumstances: You and your spouse purchased a vacant block of land (the property). The purchase was made with the genuine intention of constructing a residential dwelling and relocating to be closer to immediate family. You and your spouse intended to occupy the property as your main residence upon completion of the dwelling. You and your spouse's plans were significantly delayed due to the onset of the COVID-19 pandemic. As a result of the pandemic the construction was delayed by the lockdowns imposed, delays in supply chains and restrictions on travel. In addition to the pandemic-related delays, you and your spouse faced further personal and family-related challenges. The construction of the residential dwelling on the property was completed a couple of years ago. You and your spouse never moved into the property. Since the completion of the dwelling, the property has remained unoccupied and has not been rented or used to derive any income. Several months ago, due to ongoing family obligations, you and your spouse made the decision to sell the property. The property was sold on a couple of months after the decision to sell was made.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110

Reasons for decision: Summary: You make a capital gain or loss because of a capital gains tax (CGT) event happening to a CGT asset. CGT assets include real estate acquired on or after 20 September 1985. CGT events are those transactions that occur to a CGT asset that result in you either making a capital gain or capital loss. You make a capital gain if your capital proceeds from the sale of a CGT asset are greater than the cost base for the purchase of that asset, for example, if you receive more for an asset than you paid for it. You make a capital loss if your reduced cost base for the purchase of that asset is greater than the capital proceeds resulting from the sale of that asset, for example, if you receive less for an asset than you paid for it. Capital gains tax is not a separate tax, it forms part of your assessable income and is taxed at your marginal tax rate. | Detailed Reasoning - CGT main residence: Section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling that is your main residence. To qualify for full exemption, the dwelling must have been your main residence for the whole period you owned it, the ownership period, and must not have been used to produce assessable income. Whether a dwelling is your main residence depends on the actions of you and your family. Generally, a dwelling is your main residence if: • You and your family live in it • Your personal belongings are in it • It is the address your mail is delivered to • It is your address on the electoral roll • Services such as gas and power are connected. The length of time you stay in the dwelling and whether you intend to occupy it as your home may also be relevant. In this sense, your intentions can help to explain your actions or affect the weighting given to certain actions over others. However, your intentions are not a substitute for your actions. In Couch & Anor v Federal Commissioner of Taxation [2009] AATA 41 at paragraph 14, the Tribunal confirmed that the 'mere intention to occupy a dwelling as a sole or principal residence, but without doing so, is insufficient to obtain the exemption.' You and your spouse intended to build a home on the property and make it your main residence. When the home was built you and your spouse never moved into the property and established it as your main residence. The Commissioner understands that there were delays and family matters which impacted your decision to move into the property. The Australian Taxation Office administers the law we do not make the law. We are not able to use a discretion to exempt the CGT on the sale of the property if there is no discretion under the law. Therefore, you are not entitled to the main residence exemption on the sale of the property. There are no other exemptions from CGT that would apply in this circumstance.