Capital gains tax (CGT) law now extends the main residence exemption to the compulsory acquisition of part of your main residence, without the actual dwelling being acquired.
These changes became law on 29 June 2011 and apply to CGT events that happen from this date. You can also choose to apply the new rules to CGT events that happened at any time between the start of the 2004-05 income year and 29 June 2011.
Prior to the changes, if part of your main residence but not your dwelling was compulsorily acquired, you may have been liable to pay tax on the whole or part of the capital gain and the loss would have been available to offset against other gains.
The changes extend the CGT main residence exemption to compulsory acquisitions, or similar arrangements, which are associated with your main residence but not with your dwelling. For example, if the council compulsorily acquires part of your backyard for a public purpose.
This may allow you to disregard all or part of the capital gain or loss, where part of your main residence is compulsorily acquired by or on behalf of a government entity. To be eligible you need to meet criteria similar to the main residence exemption.
You will be entitled to the same full or partial exemption for your compulsory acquisition of a part of your main residence that you would have been entitled to if you had disposed of your dwelling.
Last Modified: Thursday, 28 June 2012