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  • Dwellings, structures and adjacent land

    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 two 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.

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    Dwellings and associated structures

    A dwelling is anything used wholly or mainly for residential accommodation, such as:

    • a house or cottage
    • an apartment, unit or flat
    • a strata title unit
    • a unit in a retirement village
    • a caravan, houseboat or other mobile home.

    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 capital gains tax (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 loss from the sale is not exempt from CGT (unless it involves compulsory acquisition).

    See also:

    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
    • 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.

    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

    Mohammed buys a house with 15 hectares of land. He uses 10 hectares for olive farming and five hectares for private purposes. Mohammed can get the main residence exemption for the house and two hectares of land he selects out of the five hectares that he uses for private purposes.

    After nine years, Mohammed decides to sell. He obtains a valuation, which states that the house and two hectares of land that he had 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.

    Mohammed claims the main residence exemption on two-thirds of the capital gain on the entire property.

    End of example

    Land you sell separately from the dwelling is subject to CGT unless either:

    • the dwelling has been destroyed accidentally and you sell the vacant land
    • the vacant land adjacent to your dwelling is compulsorily acquired.

    If the dwelling is not sold with the land (for example, because the dwelling is a caravan and has been removed or sold separately) – the sale of the land is subject to CGT.

    See also:

    Last modified: 23 Jul 2020QC 22169