Private ruling: Capital gains tax - main residence exemption - adjacent land
Date of advice: 9 August 2019
Published: October 2019
Ruling period: Year ending 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Does capital gains tax apply to the sale of property B, when sold with the adjacent land under one contract to the same purchaser on the same date? | A1: No. You are entitled to the main residence exemption on the sale of property B. If you dispose of adjacent land (including property A) to the same person and at the same time as you dispose of your main residence, the exemption extends to the adjacent land.

Relevant facts and circumstances: After 19 September 1985, you purchased property A and signed a building contract for the construction of a domestic residence shortly after. On completion of the home you moved into the dwelling with your then spouse and used it as your main residence. You later purchased an adjacent block of land, property B, and the two properties have been used for domestic purposes and share a common rear boundary. Since then, the two properties have been used for domestic purposes and share a common rear boundary. After acquiring property B, some structures including a garage were constructed and were used in conjunction with the dwelling. The garage was not a separate unit of accommodation. The dwelling was your main residence and there was no business conducted from the property, and it was not used to produce income. There was no business conducted from the properties, and it was not used to produce income. All purchases and contracts were solely in your name until the title for property A was transferred into joint names with your then spouse at a later date. The title is now in the names of both you and your former spouse as joint tenants with equal ownership share. The combined properties were listed for sale as one parcel.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 118-B | Income Tax Assessment Act 1997 section 118-120