Private ruling: Capital gains tax – main residence exemption
Date of advice: 5 July 2018
Published: September 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Question and answer: | Are you entitled to the main residence exemption for a vacant property? | No.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 section 118-110 . | Income Tax Assessment Act 1997 section 118-115 | 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, 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. You are not entitled to the main residence exemption as a dwelling was never constructed on your vacant block of land. 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.

Relevant facts: You purchased a vacant block of land. | You had house plans drawn up. | Due to ill health you did not go ahead with construction. | You sold the property on as a vacant block with house plans included.