Dwellings, adjacent land and associated structures
When selling your home, you can generally claim the main residence exemption for:
What is a dwelling?
A dwelling is anything used wholly or mainly for residential accommodation, such as:
- a home or cottage
- an apartment or flat
- a strata title unit
- a unit in a retirement village
- a caravan, houseboat or other mobile home.
Land adjacent to a dwelling
Land is adjacent to a dwelling if it is close to, near, adjoining or neighbouring the dwelling. The land a dwelling is actually on is included as part of the dwelling and is not part of adjacent land.
Land adjacent to a dwelling may also qualify for the main residence exemption if it and the dwelling are sold together and both of the following apply:
- during the period you owned it, you used the land mainly for private and domestic purposes in association with the dwelling, and
- the total area of the adjacent land and the land on which the dwelling stands is not more than two hectares (4.94 acres).
If the adjacent land is used for private purposes and is greater than two hectares, you can choose which two hectares are exempt. The remainder is subject to CGT.
Land you sell separately from the dwelling is subject to CGT unless one of the following exceptions apply:
- The dwelling has been destroyed accidentally and you sell the vacant land.
- The vacant land adjacent to your dwelling is compulsorily acquired.
If any part of the land around a dwelling is used to produce income, it is not exempt, even if the total land area is less than two hectares.
Example: Land used for private purposes
Tim buys a home with 15 hectares of land. He uses 10 hectares to produce income and 5 hectares for private purposes. Tim can get the main residence exemption for the house and two hectares of land he selects out of the 5 hectares that he uses for private purposes.
After nine years, Tim decides to sell. He obtains a valuation which states that the dwelling and two hectares of land that he has selected were worth two-thirds of the total value of the property at the time he bought it, and this has not changed over the nine years. If he makes a capital gain when he sells, Tim can therefore claim the main residence exemption on the two-thirds of the capital gain on the entire property.
End of example
Other structures associated with a dwelling
A flat or home unit often includes areas that are physically separate from the flat or unit (for example, a laundry, storeroom or garage).
As long as you use these areas primarily for private or domestic purposes in association with the flat or unit for the whole period you own it, they're exempt from CGT on the same basis as the flat or unit.
However, if you dispose of one of these structures separately from the flat or home unit (for example, you sell the garage), your capital gain or capital loss from the sale is not exempt from CGT (unless it involves compulsory acquisition – see below).
Compulsory acquisition of part of your main residence
The CGT main residence exemption also covers compulsory acquisition of part of your main residence, such as where vacant land adjacent to your home or a structure associated with your flat or unit is compulsorily acquired without the dwelling itself being acquired.
The exemption applies to CGT events that happen on or after 29 June 2011. You can also choose to apply it to CGT events that occurred at any time from the start of the 2004-05 income year up until 28 June 2011.
You can generally claim the main residence exemption for the dwelling you live in and the land sold with the dwelling (up to a limit of 2 hectares) and any associated structures, such as a separate laundry or garage. The dwelling, land and associated structures must be used for private or domestic purposes to qualify for the exemption.