Show download pdf controls
  • Land adjacent to the dwelling



    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    The land adjacent to a dwelling is also exempt from capital gains tax if:

    • during the period you owned it the land is used mainly for private and domestic purposes in association with the dwelling and
    • the total area of the land around the dwelling, including the land on which it stands, is not greater than 2 hectares (4.94 acres) . If the land used for private purposes is greater than 2 hectares, only 2 hectares is exempt.

    Land is adjacent to your dwelling if it is close to or near the dwelling.

    Any part of the land around a dwelling used to produce income is not exempt, even if the total land is less than 2 hectares. However, the actual dwelling and any buildings and other land used in association with it remain exempt if you do not use them to produce income.


    Land used for private purposes

    David bought a home with 15 hectares of land in November 1999. He uses 10 hectares of the land for income production and 5 hectares for private purposes.

    David sells the property and makes a capital gain of $15,000 of which $10,000 is attributable to the land and $5,000 to the house.

    David may claim the main residence exemption on the capital gain attributable to the house and on the following portion of the capital gain on the land:

    Capital gain on property


    land entitled to claim as
    being used for private purposes
    total area of land

    $10,000 x


    = $1,333

    If part of the 2 hectares around the dwelling is used to produce income, the capital gain on which you have to pay tax is calculated as follows:

    Capital gain applicable to the total area of land


    area of land used for income producing purposes
    total area of land surrounding and dwelling the dwelling


    Land used for income-producing purposes

    In January 2000, Shanti built a home on a 1.5 hectare block of land. She used 1 hectare of the land for market gardening and the rest for private purposes.

    If Shanti sells the land and home and makes a capital gain of $10,000, she will pay tax on the following amount.

    $10,000 x


    = $6,666

    If you sell any of the land adjacent to your home separately from the home, the land is not exempt from capital gains tax. It is only exempt when sold with the home.

    Last modified: 18 Sep 2009QC 18323