Private ruling: Main residence exemption
Date of advice: 20 April 2026
Published: 13 July 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Are you entitled to the Capital Gains Tax (CGT) exemption (Main residence) on the sale of the property? | A1: No.

Relevant facts and circumstances: On DD MM YYYY, you jointly purchased the dwelling located at the property. The property is less than X hectares. After you purchased the property, you stated it was your intention to renovate the property, including adding a granny flat and then move into it. You engaged Company A to provide architectural drawings for renovations and extension including 3rd party consultant coordination and submissions. During the process your plans changed to instead complete smaller renovations at the property including some flooring issues and painting. It was identified that there were drainage issues, which led to you deciding to not move into the property because of the water leakage and presence of mould. You engaged Company B to complete renovations at the property. On DD MM YYYY, the property was sold. On DD MM YYYY, the property settled. You did not physically live in the property. The property was not used to produce income. You did not treat any other properties as your main residence during your ownership of the property. During your ownership, you did not update you address with the following: • Australian Electoral Commission. • Drivers licence. • Your mailing address.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 118-B | Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 section 118-150

Reasons for decision: Summary: All references are to the Income Tax Assessment Act 1997 unless otherwise stated. | Detailed Reasoning - Main residence: Section 118-110 provides that a taxpayer can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling that is their main residence. To qualify for the full exemption, the dwelling must have been your main residence throughout your ownership period and must not have been used to produce assessable income. Section 118-145 provides that if a dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence (the absence choice). If you use the part of the dwelling that was your main residence for the purpose of producing assessable income, the maximum period that you can treat it as your main residence is 6 years. Section 118-110 details the basic case for the main residence exemption. It enables you to disregard a capital gain or loss made on the disposal of a dwelling, provided you are an individual, the dwelling was your main residence during your ownership period, and you have not used the dwelling to produce assessable income. Generally, you can disregard a capital gain or capital loss made on the disposal of a dwelling that is your main residence if: • the dwelling was your home for the whole period you owned it (section 118-110 and 118-185); • the dwelling was not used to produce assessable income while you were living there (section 118-190); and • any land on which the dwelling is situated is not more than two hectares (subsection 118-120(3). The main residence exemption is extended by certain provisions. Section 118-150 extends the main residence exemption to allow you to treat land as your main residence for up to four years if you build, repair or renovate a dwelling on the land that subsequently becomes your main residence. Subsection 118-150(4) provides that the exemption will apply for the shorter of the following periods: a) 4 years, or a longer time allowed by the Commissioner, before the dwelling becomes your main residence; and b) the period starting when you acquired your ownership in the land and ending when the dwelling becomes your main residence. Subsection 118-150(6) provides once you make the choice, no other dwelling can be treated as your main residence during the period referred to in subsection (4), except if section 118-140 (about changing main residences) applies. However, subsection 118-150(3) outlines that you can only apply this provision once a dwelling that you construct, repair, or renovate becomes your main residence, by moving-in as soon as practicable after the work is finished and continuing to reside in the dwelling for at least three months. | Detailed Reasoning - Application to your circumstances: In your case, you did not live in the property at any point during your ownership. This means you would not be eligible to claim the absence choice or make the choice under section 118-150. You are not entitled to main residence exemption on the sale of the property. If you were an Australian tax resident at the time of sale, you will meet all the conditions for a discount capital gain and therefore are entitled to reduce your capital gain using the discount method under Division 115.