Private ruling: Capital gains tax and main residence exemption
Published: October 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you entitled to a full or partial exemption from capital gains tax upon the sale of vacant block of land? | No.

Relevant facts and circumstances: You purchased the property with the intention of building your principal place of residence on it. Due to a change in financial circumstances you were no longer in a position to build a dwelling on the land. You had a contract with a builder but did not proceed. You sold the land so that you could buy an apartment.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-110 . | Income Tax Assessment Act 1997 Section 118-120 . | Income Tax Assessment Act 1997 Section 118-150 . | Income Tax Assessment Act 1997 Section 118-160 .

Reasons for decision: Summary: A capital gain or capital loss an individual makes from a capital gains tax (CGT) event that happens to a dwelling is disregarded if the dwelling was the individual's main residence for the entire period you owned it. The exemption extends to any capital gain or capital loss from land adjacent to a dwelling (to a maximum of two hectares) if the land was used primarily for private or domestic purposes in association with the dwelling. In your case, the property you sold was vacant land that never had a dwelling on it. Therefore, you are not entitled to the main residence exemption upon the sale of your property. Please note that the only situation where the main residence exemption can apply to a CGT event that happens to vacant land is where a CGT event happens to vacant land after a dwelling that was your main residence is accidentally destroyed. In your case, the dwelling never existed and therefore this exemption does not apply to you. In addition, please also note that the Commissioner does not have any discretion to allow you to disregard a capital gain or capital loss where no exemption is available to you under the taxation law.