Constructing, renovating or repairing a dwelling on land you already own
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Generally, if you build a dwelling on land you already own, the land does not qualify for exemption until the dwelling becomes your main residence. However, you can choose to treat land as your main residence for up to 4 years before the dwelling becomes your main residence in certain circumstances. If you make this choice, the land is exempt for the period both before construction and after it becomes your main residence.
You can choose to have this exemption apply if you acquire an ownership interest (other than a life interest) in land and you:
- build a dwelling on the land
- repair or renovate an existing dwelling on the land, or
- finish a partly constructed dwelling on the land.
There are a number of conditions that must be satisfied before you can claim the exemption. You must first finish building, repairing or renovating the dwelling and then:
- move into the dwelling as soon as practicable after it is finished
- continue to use the dwelling as your main residence for at least 3 months after it becomes your main residence.
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 4-year period immediately before the date the dwelling becomes your main residence or
- the period between the date you acquired the land and the date the dwelling becomes your main residence.
The period of exemption usually starts from the date you acquired the land. However, if after you acquired the land you or someone else occupied a dwelling that was already on the land, the period of exemption starts from the date that dwelling was vacated.
If you make this choice, you cannot treat any other dwelling as your main residence for the period, except for a limited time under the moving from one main residence to another rule.
Therefore, if you have a dwelling you acquired on or after 20 September 1985 and you live in it while you build your new home, you must decide whether to:
- maintain the exemption for your old home or
- have the exemption apply to the land (including the dwelling that is being built, renovated, repaired or finished on it) for the shorter of:
- the time from when you acquire the land until the new home becomes your main residence or
- the 4-year period immediately before the date on which the new home becomes your main residence.
If you acquired your old main residence before 20 September 1985, it is exempt. This means you will benefit from choosing to treat the land on which your new dwelling is to be built, renovated, repaired or finished as your main residence for the relevant dates above.
You cannot choose to have a shorter period of exemption for the new home in order to exempt the old home for part of the construction period.
Choosing to claim exemption for the land from the date of construction
Grant bought vacant land on which he intended to build a new home under a contract that was settled on 3 September 1998. He bought his previous home under a contract that was settled on 3 November 1991.
Grant finished building his new home on 8 September 2001. He moved into it on 7 October 2001, which was as soon as practicable after completion. He sold his previous home under a contract that was settled on 1 October 2001.
If Grant wants to, he can:
- treat the new home as his main residence from 3 September 1998
- claim the exemption for his previous home from 3 November 1991 to 2 September 1998.
Both homes are also exempt from 1 April 2001 to 1 October 2001, the date Grant disposed of the old home. This is because the maximum 6-month exemption outlined in the section Moving from one main residence to another also applies.
If you were to die at any time between entering into contracts for the construction work and the end of the first 3 months of residence in the new home, this exemption can still apply.
If you owned the land as a joint tenant and you die, the surviving joint tenant (or if none, the trustee of your estate) can choose to treat the land and the dwelling as your main residence for the shorter of:
Last modified: 06 Oct 2009QC 27417
- 4 years before your death or
- the period starting when you acquired the land and ending when you die.