Private ruling: CGT, multiple dwellings, main residence exemption, single title
Date of advice: 17 December 2025
Published: 9 February 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Will the forced sale of your half of a duplex property, which you occupied as your main residence, qualify for the partial main residence Capital Gains Tax (CGT) exemption under Subdivision 118-B of the Income Tax Assessment Act 1997 ? | A1: Yes. You can claim a partial main residence exemption for the property you lived in. This is based on your ownership percentage in that property, the number of days the dwelling was not your main residence divided by the total number days of your ownership.

Relevant facts and circumstances: Person A and B, as tenants in common with another couple in your family (Person G and H), purchased Property B on DD MM 20YY. There was no separate written agreement between all 4 owners in relation to the purchase, demolition, and construction of Property C and D. There was only a contract with the builder. Property B sold on DD MM 20YY for $XXX. The borrowers on the loan were Person A and B and another couple, Person G and H. The original loan was with the Lender A to purchase Property B, and subsequently a construction loan, with the same lender was obtained when you found a builder. Property B was rented out before it was demolished. Your rental property schedule lodged for the income year ended 30 June 20YY declared the property first earned rental income on DD MM 20YY. Demolition of the dwelling at Property B started DD MM 20YY. Construction of property C and D commenced on DD MM 20YY. Property C and D were available to be occupied on DD MM 20YY. The land with property C and D on was not formally divided and the Title remained as a single lot in the names of Person A, B, G and H. Property D was the primary place of residence for Person A and B. Property C and D were physically separated. Person A and B did not live communally with Person G and H in both properties C and D. Person G approached you needing funds to pay for a debt due. You agreed to help. A second mortgagee loan was obtained through a General Security Deed made on DD MM 20YY with: • the borrower was Company A as trustee for Family Trust A (the Grantor). • the Secured Party to the Deed were Person X and Y, and Company B. The Loan Agreement principal amount was $XXX with xx month term with: • Property B as the security for the payment of amounts owing by the borrower Company A to the lender Person X and Y, and Company B • Person A, B, G and H were guarantors to the loan • the lender is entitled and the borrower consents to the lender to lodge registered second mortgage of the property known as Property B. Person A or B did not get any money from the second loan. Person G and H in Property D had legal and debt problems. When Person G failed to remove the second mortgagee, and all their assets and accounts were frozen. The second mortgagee took legal action to take possession of Property B and newly constructed Property C and D. The lender took possession of Property B on DD MM 20YY, and because Person A and B were guarantors on that mortgage Person A and B were forced to vacate Property D. When the lender took possession of the duplexes the remaining loan amount was $XXX. Person A and B have not claimed the main residence exemption on any other property during the ownership period, and did not use their dwelling to produce assessable income. A deed of partition was entered into on DD MM 20YY, which had always been the intention of the parties, and all that remained to do was to lodge the transfers to give effect to the partition. However, the freezing order effective on DD MM 20YY meant that the transfers couldn't be lodged and registered. The Titles were legally subdivided by the lender from the deposited plan and registered by City K on DD MM 20YY. Under a mortgagee sale Property C and D were sold on DD MM 20YY for $XXX and $XXX dollars respectively.

Relevant legislative provisions: Income Tax Assessment Act 1997- Division 100 | Income Tax Assessment Act 1997- section 110-25 | Income Tax Assessment Act 1997- Subdivision 118-B | Income Tax Assessment Act 1997- section 118-110 | Income Tax Assessment Act 1997- section 118-115 | Income Tax Assessment Act 1997- subsection 118-115(1) | Income Tax Assessment Act 1997- section 118-130 | Income Tax Assessment Act 1997- section 118-140 | Income Tax Assessment Act 1997- section 118-145 | Income Tax Assessment Act 1997- section 118-185

Reasons for decision: Summary: Section 118-130 of the ITAA 1997 provides you have an ownership interest in land or a dwelling if, the dwelling, which is not a flat or home unit, is erected on it. Where either are acquired under a contract, the ownership interest is from the time when you obtain legal ownership of it, or when you have a right to occupy it, the earlier time. Your ownership period of the dwelling is when your ownership interest occurred. Person A and B with another couple Person G and H, purchased the Property B on DD MM 20YY. You get an exemption from CGT in relation to a dwelling that is your main residence. This is called the main residence exemption (section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997)). You only get a partial exemption if the dwelling was used as your main residence for part of the period of ownership (section 118-185 of the ITAA 1997). Neither Persons A, B, G or H lived in the former house. It was used to produce assessable income, and it is not eligible for the main residence exemption. The demolition of Property B started on DD MM 20YY. Construction of the Property C and D started DD MM 20YY and were available to be occupied on DD MM 20YY. When you buy a new main residence, you can continue to treat your previous main residence as exempt from CGT for a period of up to 6 months while you sell that main residence. This is provided you lived in your previous main residence for a continuous period of 3 months in the 12 month period prior to its sale. Your new main residence is also treated as being exempt from CGT during this time (section 118-140 of the ITAA 1997). Otherwise, you can only claim the main residence exemption for one property at a time (section 118-145 of the ITAA 1997). The testing for determining whether a dwelling is a main residence is contained in Subdivision 118-B of the ITAA 1997. 'Dwelling' is defined in subsection 118-115(1) of the ITAA 1997 to include: a) a unit of accommodation that: i. is a building or is contained in a building; and ii. consists wholly or mainly of residential accommodation; and b) a unit of accommodation that is a caravan, houseboat or other mobile home; and c) any land immediately under the unit of accommodation. 'Dwelling' is not otherwise defined and so takes on its ordinary meaning. The Macquarie Dictionary defines 'dwelling' as 'a place of residence or abode; a house'. In Campbell v O'Sullivan [1947] SASR 195 at 201, May J stated that: ..."dwelling" ordinarily signifies a place of abode or residence, a tenement, habitation or house, which premises a person or persons are using as a place for sleeping and usually for the provision of some meals. Taxation Determination TD 1999/69 Income tax: capital gains: can the term 'dwelling' as defined in section 118-115 of the Income Tax Assessment Act 1997 include more than one unit of accommodation? (TD 1999/69) confirms that the term 'dwelling' as defined in section 118-115 of the ITAA 1997 can include more than one unit of accommodation where the units of accommodation are used together as one place of residence or abode. Whether two or more units of accommodation are used together as one place of residence or abode for the purposes of the definition of 'dwelling' is a question of fact that depends on the particular circumstances of each case. Paragraph 4 of TD 1999/69 provides the following factors as relevant in considering whether multiple units of accommodation may be considered one residence or abode: a) whether the occupants sleep at and live in them; b) the distance between and the proximity of the units of accommodation; c) whether the units are connected; d) whether the units are capable of being sold separately; e) the extent to which the daily activities of the occupants in the units are integrated; f) how the units are shared by the occupants; and g) how the costs of the units are shared by the occupants. The presence or absence of any of these factors are not necessarily determinative as all the facts and circumstances of each particular case needs to be considered as a whole. | Detailed Reasoning - Application to your circumstances: In your case, Persons A, B, G and H purchased Property B as tenants in common. When Property B was demolished, Property C and D were built on the land, under a single Land Title. The single Land Title was not subsequently subdivided. There was no separate written agreement between all 4 owners in relation to the purchase, demolition, and construction of Property C and D. The only contract was with the builder. Person A and B resided at Property D and moved in on DD MM 20YY. Person G and H lived in Property C. Each of the 4 of you remained the legal owners of the whole property (land and Property C and D). Even if the land was subdivided, your circumstances would have remained the same unless each of you transferred your ownership interests to the other couple. You said Person G came to you saying he had financial problems, and you agreed to help. A second mortgagee by loan agreement was made on DD MM 20YY with: • the borrower as Company A as trustee for Family Trust A • the lender, were Person X and Y, and Company B • Persons A, B, G and H were guarantors. You did not receive any money from the second loan. Person G said the second mortgagee would be removed when their funds came in, but failed to do so, and all their assets and accounts were frozen. The investigation did not involve you. The second mortgagee took possession of the Property B (land and Property C and D) on DD MM 20YY. On this date you were required to vacate your home, Property D. The Persons G and H also had to vacate Property C. Subdivision of the land occurred before the sale of Property C and D by the second mortgagor. At this point there were 2 separate assets. Property C and D were sold on DD MM 20YY sold for $XXX and $XXX respectively. The remaining loan amount for both Property C and D was $XXX. | Detailed Reasoning - Main residence: When there are multiple dwellings on a lot, the main residence exemption can be claimed for more than one dwelling only where, the individual lives in and uses both dwellings as their main residence. Persons A, B, G and H did not live communally in both of the duplexes. You lived in Property F and Person G and H in Property C. Property D became your main residence on the date you moved in. The Land Title was not subdivided nor were the ownership interests in Property C and D transferred. The borrowers Persons A, B, G and H had a 25% ownership interest in the land and Property C and D. Because of this, the main residence exemption available to you will be limited. | Detailed Reasoning - Capital gains tax: Division 100 of the ITAA 1997 provides a simple view of capital gains and capital loss provisions. A capital gain is the difference between what it cost you to own an asset and what you received when you disposed of it. Selling an asset that has increased in value generates income, which needs to be included in your assessable income. Because the increase in value of your asset is only realised once you dispose of the asset, it can only become part of your income in the year the asset is sold. For that reason, you are taxed on the income made from the increased value of your asset in the year of its disposal, rather than in each of the years that the increase in value occurred. Your capital gain is the balance of the proceeds of the disposal of the asset less what the asset cost you. Person A and B, as well Person G and H were legal owners of the land and Property C and D. Each tenant in common makes a capital gain or capital loss from a CGT event in line with their interest in the asset. After the second mortgagee took possession of Property B (Property C and D), the subdivision of the land occurred. At this time there were 2 separate CGT assets. Each person had a 25% interest in each of the separate CGT assets, and because of the subdivision, the capital gain is calculated separately for each dwelling. Therefore, your capital gain will need to be calculated separately for each asset, Property C and D. Section 110-25 of the ITAA 1997 provides the general rules about cost base. The cost base of a CGT asset is made up of five elements. | Detailed Reasoning - First element: You purchased Property B for $XXX. Generally, this amount would be the first element of the cost base. However, your situation is different as there are 4 owners. In your case, you will need to apportion the amount between each person, assuming the contributions to the purchase price were equal we expect this would be: • the first 25% of purchase price calculates to be $XXX for each person • then divide this amount between the 2 properties. This results in the first element of the cost base being $XXX for each person and for each property. | Detailed Reasoning - Second element: The second element includes incidental costs of acquiring the CGT asset or that relate to the CGT event. For example: • each person's original contribution to the purchase of Property B (excluding amounts that fall under the First Element) • each person's building costs incurred in building Property C and D • each person's borrowing expenses (such as loan application fees and mortgage discharge fees). Do not include such costs if you have claimed a tax deduction for them or could claim a deduction if you amended your tax return. Amounts must be apportioned between the four parties and also apportioned between the two properties. You can only claim expenses you actually incurred. | Detailed Reasoning - Third element: This element relates to the costs of owning the CGT asset: • the costs of owning an asset include rates, land taxes, repairs and insurance premiums. Non-deductible interest on borrowings to finance a loan used to acquire a CGT asset and on loans used to finance capital expenditure you incur to increase an asset's value are also third element costs. However, there may be some amounts that do not need to be apportioned between the two dwellings if you incurred those expenses solely in relation to the dwelling you occupied. Do not include such costs if you have claimed a tax deduction for them or could claim a deduction if you amended your tax return. Amounts must be apportioned between the four parties and also apportioned between the two properties. You can only claim expenses you actually incurred. | Detailed Reasoning - Fourth element: This element relates to capital costs to increase or preserve the value of your asset or to install or move it, e.g. costs incurred in applying for zoning changes. This may not be applicable to you. | Detailed Reasoning - Fifth element: This element relates to capital costs of preserving or defending your title or rights to your CGT asset. | Detailed Reasoning - Application to your circumstances: It is important to note that expenses incurred solely in relation to the dwelling you occupied cannot be include in your cost base for the other dwelling, Property C. Because Property B was used to produce income prior to the construction of the dwellings, and prior to Property D becoming Person A and B's main residence, a partial main residence exemption will apply to any capital gain arising from the sale of duplex Property D. You calculate the part of the capital gain that is taxable as follows: • total capital gain made from the CGT event multiplied by • number of days in your ownership period when the dwelling was not your main residence ÷ total number of days in your ownership period Since you owned Property D for more 12 months you are also entitled to the 50% CGT discount. As Property C was never your main residence, you are not entitled to any main residence exemption in relation to this property. Nevertheless, as you owned your portion of that asset for more than 12 month you are entitled to the 50% CGT discount. 'Using your home for rental or business' is available on ato.gov.au - search for "QC 66033" provides information when your rental property becomes your main residence and a partial main residence exemption.