Private ruling: Capital gains tax - disposal of main residence and attached land
Published: March 2014
Ruling period: 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Is the capital gain or capital loss made on the disposal of your main residence and attached land disregarded? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Approximately 25 years ago you and your spouse jointly acquired a property as tenants in common. The property is your main residence. The dwelling on the property was constructed prior to 20 September 1985. The driveway entry to the dwelling had a wide frontage from road A. The traffic increased on road A over the years and approximately X years ago you and your spouse purchased some land to get a driveway entry from road B, a quiet side street. You and your spouse added the newly acquired land to your property title and your residential address became X road B. The original access from road A to your present land was subdivided at the same time you acquired the new land and access from road B. It became Y road B. Y road B has been continuously used and maintained as part of your main residence. The relevant Land Tax Office has always given an exemption from land tax for Y road B since acquisition as it is considered to be part of your dwelling on X road B. You and your spouse are going to downsize and dispose of your dwelling and attached land. Your solicitor has prepared separate draft contracts for the sale for X and Y road B. You and your spouse will dispose of both X and Y road B to one purchaser. You have provided documentation to support your application and this documentation is to be read with and forms part of your application for the purpose of this ruling.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-120 | Income Tax Assessment Act 1997 Section 118-165

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. The most common capital gains tax (CGT) event (CGT event A1) happens if an individual disposes of a CGT asset to another entity. The time of the event is when the contract for the disposal is entered into, or if there is no contract, when the change of ownership occurs. CGT event A1 will occur when you and your spouse dispose of X and Y road B. | Detailed Reasoning - Main residence: As a general rule, you can disregard any capital gain or capital loss realised on the disposal of a dwelling if: • they are an individual • the dwelling was their home for the whole period they owned it; and • the dwelling was not used to produce assessable income. The exemption extends to land provided the following requirements are satisfied: • the land is adjacent to the land on which the dwelling is situated • the land does not have to be contiguous to (that is, touching or in contact with) the land on which a dwelling is situated to be 'adjacent' to the dwelling; • the total area of land is not greater than two hectares • the land is used primarily for private or domestic purposes in association with the dwelling; and • the land is not disposed separately from the dwelling. If the adjacent land is disposed of to the same person and at the same time as the main residence, the exemption extends to the adjacent land. In your case, you and your spouse are disposing of your main residence and attached land at X and Y road B to the same purchaser. Therefore, any capital gain or capital loss made on the disposal of the X and Y road B is disregarded.