Private ruling: Commissioner's discretion - main residence exemption
Date of advice: 20 August 2024
Published: 30 September 2024
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY | Year ended 30 June 20YY
Date scheme commenced: DD MM 20YY

Ruling: Q1: Will the Commissioner exercise his discretion to extend the four-year time period under section 118-150 of the Income Tax Assessment Act 1997 in relation to the dwelling? | A1: Yes, to the extent that you can claim the main residence exemption from capital gains tax (CGT) up to a maximum area of two hectares including the area of land on which the dwelling is situated. If your land is used for private purposes and is greater than 2 hectares, you can choose which 2 hectares are exempt, the rest is subject to CGT. If any part of the land is used to produce income it is not exempt. This is the case even if the total land area is less than 2 hectares. The 2 hectares you choose must include the land that is under your dwelling. Further information regarding the two-hectare limitation can be found by searching 'QC 66037' on ato.gov.au.

Relevant facts and circumstances: You purchased a block of land located at XXXX (the property) on DD MM 20YY. The size of the block of land is less than 2 hectares. After selecting a builder and accruing more savings, you signed a building contract on DD MM 20YY. As the shape of the land is not rectangular, the design of the dwelling required zero boundary walls with the neighbouring properties. The city planning authority had to notify the neighbouring properties and wait for feedback. One of the neighbouring properties did not respond, delaying the application by 2-3 months. Planning Approval was granted on DD MM 20YY. Once the approval was granted, the application for the building permit was lodged shortly thereafter. You received the building permit on DD MM 20YY, with an estimated construction completion date of DD MM 20YY. With the introduction of COVID-19 related government grants that had specific eligibility criteria addressing contract and completion dates, you found that other prospective properties became the priority for the construction industry. You were not eligible for any of these grants, as your building contract was signed before the introduction of these grants. On DD MM 20YY you received a notification from your builder that all approvals had been received and that your contract documentation was finalised. The initial construction/site works began in MM 20YY. The slab was laid on DD MM 20YY. Following the completion of the slab, the bricks needed to be laid. The bricks material were delivered in MM 20YY, however due to a shortage of local bricklayers in your state (and also weather conditions impacted the ability to complete the work) the bricks were not laid until DD MM 20YY. Due to a shortage of local tradespersons, work could not continue for several months. You received regular updates from your builder explaining that the work would be delayed (for reasons such as a shortage of materials due to supply chain issues and COVID-19 related border closures). You were also notified that some of the materials were stolen from the building site, and due to supply shortages it would be some time before they could be replaced. On DD MM 20YY, you received a letter from your builder formally notifying you that the contractual completion date of the property would be extended by several months. The roof installation was completed on DD MM 20YY. The "lock up stage" (which included such works as applying plaster to the walls and installing the ceiling) was completed on DD MM 20YY. The "practical completion" stage (which included the installation of interior materials and appliances) was completed on DD MM 20YY. This was delayed due to the ongoing shortage of labour and materials. The keys for the property were not provided to you for several months following finalisation of the "practical completion" stage. There were multiple defects in the property detected that needed addressing, however repairing these were also delayed due to shortage of labour and materials. The property was ready for handover on DD MM 20YY. You moved into the property shortly thereafter. You have continued to live at the property since that date as your main residence.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-150 Part 18 of the Tax Laws Amendment (2011 Measures No. 2) Bill 2011