Edited version of private advice

Authorisation Number: 1052308394050

Date of advice: 26 September 2024

Ruling

Subject: CGT - main residence exemption

Question 1

Can you disregard the capital gain or loss made on the sale of Property B?

Answer 1

Yes.

You can apply the main residence exemption to disregard the capital gain or capital loss you made on the sale of Property B.

You meet the requirements under section 118-150 of Income Tax Assessment Act (ITAA 1997) to treat Property B as your main residence from the time you purchased it (as vacant land) until it became your main residence as:

•                Property B became your main residence as soon as practicable after construction finished;

•                Property B became your main residence within 4 years of you acquiring the vacant land; and

•                Property B continued to be your main residence for more than 3 months.

Therefore, you can treat Property B as your main residence from purchase until XXXX 20XX when you moved in, and it became your main residence.

Note

For the purpose of determining the date of a CGT event and the date of acquisition of a CGT asset, the date the relevant contract is entered into is used instead of the settlement date. However, it is the opposite for CGT main residence exemption purposes for which the settlement date is used instead. For CGT main residence exemption purposes, your ownership period is based on when you had legal ownership of the property. Your legal ownership of a property you sell ends on settlement of the contract to sell. Your legal ownership for a property you purchase only commences on settlement of the contract to purchase.

As settlement of the sale of Property A coincided with the settlement of the purchase of Property B, there is no overlap of ownership for CGT main residence exemption purposes and therefore section 118-140 of ITAA 1997 about changing main residences does not apply.

This ruling applies for the following period:

Year ended XX June 20XX

The scheme commenced on:

XX July 20XX

Relevant facts and circumstances

In XXXX 20XX, you purchased land to build your main residence. The address of this property was Property A.

In XXXX 20XX, you entered into a construction contract to build your primary residence at Property A.

Property A became your main residence.

In XXXX 20XX, you purchased vacant land with the intention of building your future main residence. The address of this property was Property B.

In XXXX 20XX, you sold Property A.

On XX XXXX 20XX, the sale of property A and the land purchase for Property B settled.

From XX XXXX 20XX to XX XXXX 20XX, you rented property A from the new owners, whilst your Property B was under construction.

From XXXX 20XX to XX XXXX 20XX, you lived with a friend, due to delays in the building of Property B.

From XX XXXX 20XX, you were able to get partial occupancy during the time your build was being finished.

In XXXX 20XX, you gained full occupancy of Property B and moved in immediately.

In XXXX 20XX, you sold property B.

On XX XXXX 20XX, the sale of Property B settled.

You did not use Property A and Property B to produce assessable income during your ownership period.

Property A and Property B's land size were less than 2 hectares.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-150

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).