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  • Building or renovating your home

    If you build a dwelling on land you already own, the land normally isn't exempt from CGT until the dwelling becomes your main residence.

    However, you can treat land as your main residence for up to four years before the dwelling becomes your main residence if you:

    • have an ownership interest (other than a life interest) in the land
    • build, repair or renovate a dwelling on the land (or finish a partly constructed dwelling), and
    • move into the dwelling as soon as practicable after it's finished and continue to use it as your main residence for at least three months.

    If you choose to do this, you can't treat any other dwelling as your main residence for the same period (except for a limited time if you're moving from one main residence to another).

    Find out about:

    Period for which the land is exempt

    The land, including the dwelling that is being built, renovated, repaired or finished on it, is exempt for the shorter of the following periods:

    • the four years immediately before the dwelling becomes your main residence, or
    • the period between the date you acquire the land and the date the dwelling becomes your main residence.

    However, if after you acquired the land you or someone else occupied a dwelling that was already on the land, the period of exemption does not start until that dwelling is vacated.

    Replacing a demolished or destroyed dwelling

    If you build a new dwelling to replace a dwelling that was demolished or destroyed, you can get a full exemption when you dispose of the property if all of the following apply:

    • you were eligible for the full main residence exemption for the original dwelling at the time it was demolished or destroyed
    • the new dwelling:
      • becomes your main residence as soon as practicable after it is completed
      • continues to be your main residence until you dispose of it
      • is your main residence for at least three months
       
    • you choose to treat the vacant land and new dwelling as your main residence for the period starting when you stopped occupying the previous dwelling and ending when the new dwelling becomes your main residence, and this period is four years or less
    • you dispose of the land and new dwelling together.

    Implications of your choice

    If you choose to treat land as your main residence while you complete your dwelling, you can't treat any other dwelling as your main residence for the same period, except for a limited time if you're moving from one main residence to another.

    This means if you have a dwelling you acquired on or after 20 September 1985 and you live in it while you build your new dwelling, you must decide whether to:

    • maintain the exemption for your old home, or
    • have the exemption apply to the land (including the new dwelling) for the shorter of: 
      • the time from when you acquire the land until the new dwelling becomes your main residence, or
      • the four-year period immediately before the new dwelling becomes your main residence.
       

    If you acquired your old main residence before 20 September 1985, it's generally exempt. In this case your best option is to treat the land and new dwelling as your main residence.

    You can't choose to have a shorter period of exemption for the new dwelling in order to exempt the old home for part of the construction period.

    Example

    Ahmed built a new dwelling on a vacant block of land he bought, and moved from his old home into the new one. His key dates are:

    • 3 November 1994 – contract settled to buy old home
    • 3 September 2007 – contract settled to buy land for new dwelling
    • 2 September 2016 – finished building new dwelling
    • 1 October 2016 – contract settled to sell old home
    • 7 October 2016 – moved into new dwelling (this was as soon as practicable after completion).

    Ahmed can treat the new dwelling as his main residence from 7 October 2012 – that is, for the four years immediately before the new dwelling actually becomes his main residence.

    Ahmed's old home is exempt:

    • from 3 November 1994 (when he acquired it) until 6 October 2012 (just before he began treating the dwelling under construction as his main residence)
    • for the six months before he disposed of it – that is, from 1 April 2016 to 1 October 2016 – because during this period he can treat both dwellings as his main residence under the rules for moving from one main residence to another.
    End of example

    See also:

    If the owner dies during construction

    If the owner of the dwelling under construction were to die at any time between entering into contracts for the construction work and the end of the first three months of residence in the new home, this exemption can still apply.

    If the deceased owned the land as a joint tenant and died, the surviving joint tenant (or if none, the trustee of the deceased estate) can choose to treat the land and the dwelling as the deceased's main residence for the shorter of:

    • four years before their death, or
    • the period starting when they acquired the land and ending when they died.

    If there was already a dwelling on the land when the deceased acquired it and someone else occupied it after that time, the surviving joint tenant (or if none, the trustee of the deceased estate) can choose to treat the land and the dwelling as the deceased's main residence for the shorter of:

    • four years before their death, or
    • the period starting when the dwelling stopped being occupied so that it could be repaired or renovated and ending when they died.

    See also:

    Last modified: 17 Jul 2017QC 52192