Private ruling: Main residence exemption for capital gains tax
Date of advice: 18 December 2018
Published: April 2019
Ruling period: Year ending 30 June 2019
Date scheme commenced: 1 July 2018

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

Relevant facts and circumstances: You were residing in the main residence since 19XX. The dwelling was demolished in 20XX. You intended to build two town houses on the land with one being sold and the other for you to live in. You had a number of building and legal issues over a three year period. In 20XX you sold the first of the town houses. The second town house was not at lock up stage at this time. The building works stop while you engaged in a legal dispute with the builder until a settlement was reached in 20XX. A new builder was appointed but eventually terminated. A suitable builder was not found until early 20XX. Building works are now progressing to your satisfaction. You intend to sell the second town house upon completion. You do not intend to live in the house prior to selling the property.

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

Reasons for decision: Detailed Reasoning - Capital gains tax: A capital gain or capital loss an individual makes from a capital gains tax (CGT) event that happens to a dwelling is disregarded under section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) if the dwelling was the individuals main residence for the entire period you owned it. Section 118-150 of the ITAA 1997 provides that the main residence exemption may be applied to land retrospectively for a maximum period of four years, or a longer time allowed by the Commissioner, provided that: ● a dwelling is actually constructed on the land, ● you move into the dwelling as soon as practicable after the construction is finalised; and ● it continues to be your main residence for at least three months. The mere intention to construct a dwelling or to occupy a dwelling as a sole or principle residence, but without actually doing so, is insufficient to obtain the exemption. In your circumstances, you have indicated that the property will be sold without you occupying the dwelling for the required three month period and therefore the main residence exemption will not apply.