Private ruling: Main residence exemption
Date of advice: 17 April 2019
Published: June 2019
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the disposal of your property subject to capital gains tax? | A1: Yes You are entitled to the main residence exemption as you sold the dwelling and adjacent land together and it has only been used for private purposes. However, as the property is greater than two hectares, you can choose which two hectares are exempt. This must include the land the dwelling is on. The remainder of the property over the two hectares will be subject to the CGT provisions as it is not covered by the main residence exemption.

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. You acquired the property from a relative in 200X. The total area of the property is more than 2 hectares. The property was your main residence and there was no business conducted from the property, and it was not used to produce income. In 20XX you left Australia to live and work overseas where you are a resident of tax purposes. You have made occasional trips back to Australia since 20XX. In 20YY you entered into a contract for the sale of the property. Settlement took place later that year.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 118-B | Income Tax Assessment Act 1997 subsection 118-120(2) | Income Tax Assessment Act 1997 subsection 104-10 (3)

Reasons for decision: Summary: The main residence exemption extends to a maximum of two hectares of land adjacent to the dwelling, including the area of the land on which the dwelling is built (exempt land). 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. Adjacent land is only included in the two hectare exemption if the land is used primarily for private or domestic use and not to earn assessable income, such as primary production. Excess land (non-exempt land) over the two hectares will be subject to the CGT provisions as it is not covered by the main residence exemption.