Private ruling: CGT - disposal of vacant land
Date of advice: 27 March 2026
Published: 29 June 2026
Ruling period: Year ending DD/MM/20YY
Date scheme commenced: DD/MM/20YY

Ruling: Q1: Can you disregard any capital gain or loss you make on the disposal of the vacant land at XXX under the main residence exemption? | A1: No

Relevant facts and circumstances: In MM/20YY, you (Person A and Person B) purchased a block of land at XXX. You rented a property in a nearby suburb. Your intention was to build a family home on the block. You enrolled your child in a nearby school. You began attending project home viewings. You received approval of conditional finance. During 20YY and 20YY, you met with several builders. You paid deposits to some of these builders before you discovered they did not build in your area. Between 20YY and 20YY, you again met with a number of building companies and whilst you negotiated plans with several, you did not sign a contract. In 20YY, you signed a contract with Company A, to design your own home and obtained council approval. In MM/20YY, you purchased a townhouse in a nearby suburb with the intention for it to be an investment property. During 20YY, you continued with your plans and council approvals with Company A. In MM/20YY, Person A became ill which lead to you putting the building plans on hold. In 20YY, you decided to sell the vacant block of land due to health and financial reasons. You re-engaged with Company A to assist with selling the land and council approval. You engaged a real estate agent to market the sale of land. On DD/MM/20YY, a contract of sale was signed. On DD/MM/20YY, settlement occurred.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-150

Reasons for decision: Summary: You cannot disregard the capital gain or capital loss made on the sale of your vacant land where you intended to build a dwelling on it as your main residence but failed to do so. | Detailed Reasoning - Detailed reasoning: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or capital loss results from a CGT event occurring. The most common capital gains tax (CGT) event, CGT event A1, occurs when you dispose of a CGT asset to someone else. For example, if you sell a property. Land and dwellings are CGT assets. Pursuant to section 118-110 of the ITAA 1997, you can generally disregard any capital gain or capital loss from a CGT event that happens to a dwelling that is your main residence for the entire period you owned it when: • the dwelling was your home for the whole period you owned it; • the dwelling was not used to produce assessable income; and • any land on which the dwelling is situated is not more than two hectares. There are limited situations that enable the main residence exemption to be extended to vacant land, for those to apply there must be a dwelling that you have resided in during your ownership period. 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 principal residence, but without actually doing so, is insufficient to obtain the main residence exemption. | Detailed Reasoning - Application to your circumstances: In your case, you purchased the Vacant Land, however construction of the dwelling never commenced. We accept that you intended to construct a dwelling on the Vacant Land but due to unforeseen circumstances, the dwelling was never constructed. The Vacant Land that you owned is a CGT asset and a CGT event happened to it when you disposed of it. No matter how valid your reason for not being able to construct the dwelling and subsequently move into the dwelling, a mere intention to occupy a dwelling as your main residence without doing so is not sufficient to obtain the main residence exemption and there is no discretion available to the Commissioner to allow a main residence exemption on the sale of the Vacant Land. This means you cannot disregard any capital gain or loss under the main residence exemption. You will be liable for tax on any capital gain made on the disposal of the Property. However, you will be entitled to claim a 50% discount on any capital gain because the acquisition date will be more than 12 months prior to the date of disposal.