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Edited version of private advice
Authorisation Number: 1052233445160
Date of advice: 20 March 2024
Ruling
Subject: CGT - main residence exemption
Question
Will the main residence exemption from capital gains tax (CGT) extend to the sale of adjacent land at Lot 1 as provided in section 118-120 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
Lot 1 is the adjacent land to the dwelling at Lot 2 according to the principles outlined in Taxation Determination TD 1999/68 Income tax: capital gains: is 'adjacent' land in terms of section 118-120 of the Income Tax Assessment Act 1997 limited to land contiguous to a dwelling? (TD 1999/68).
Lot 1 and Lot 2 had been sold on the same day to same purchaser under identical contracts of sale besides the different date of settlement on lot 1. The 2 lots:
• had a combined total area of less than two hectares
• were used together for private purposes during your ownership periods; and
• were sold together in the same sale transaction.
Therefore, section 118-120 of the ITAA 1997 will apply to extend the main residence exemption from CGT to Lot 1.
This ruling applies for the following period:
Year ended 30 June 20YY
The scheme commenced on:
DD MM YYYY
Relevant facts and circumstances
You and your spouse purchased the dwelling (the Property) as joint tenants after 20 September 1985.
You and your spouse moved in after settlement and occupied the Property as main residence on XX February XXXX.
You transferred your interest in the Property to your spouse as an asset protection strategy, for no consideration.
You investigated subdividing the Property. As a result, a subdivision plan was certified by the council.
On XX September XXXX, a divorce order was issued between you and your spouse.
A short time later, a plan of subdivision was lodged, and two titles were issued, Lot 1 being a block of vacant land and Lot 2 on which the dwelling was located. The combined land area of two lots was less than two hectares.
In September of XXXX, your spouse transferred the two lots to you as part of the agreed verbal settlement in the divorce proceedings.
You continued to occupy the dwelling on the Lot 2 and used both lots only for private domestic purposes.
On XX August XXXX, you sold the Property to the same purchaser.
The 2 lots were on separate contracts which were executed on the same day, and identical in every respect besides the price of each Lot and the later settlement date on the contract of Lot 1.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 102-20
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 118-110
Income Tax Assessment Act 1997 section 118-120
Income Tax Assessment Act 1997 section 118-165
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