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Edited version of your written advice
Authorisation Number: 4130047749314
Date of advice: 5 July 2018
Ruling
Subject: Capital gains tax – main residence exemption
Question and answer:
Are you entitled to the main residence exemption for a vacant property?
No.
This ruling applies for the following period:
Year ended 30 June 2017
The scheme commenced on:
1 July 2016
Relevant facts
You purchased a vacant block of land.
You had house plans drawn up.
Due to ill health you did not go ahead with construction.
You sold the property on as a vacant block with house plans included.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 102-5
Income Tax Assessment Act 1997 section 118-110.
Income Tax Assessment Act 1997 section 118-115
Income Tax Assessment Act 1997 section 118-150
Reasons for decision
Capital gains tax
A capital gain or capital loss an individual makes from a capital gains tax (CGT) event that happens to a dwelling is disregarded under section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) if the dwelling was the individuals main residence for the entire period you owned it.
Section 118-150 of the ITAA 1997 provides that the main residence exemption may be applied to land retrospectively for a maximum period of four years, provided that:
● a dwelling is actually constructed on the land,
● you move into the dwelling as soon as practicable after the construction is finalised; and
● it continues to be your main residence for at least three months.
The mere intention to construct a dwelling or to occupy a dwelling as a sole or principle residence, but without actually doing so, is insufficient to obtain the exemption.
You are not entitled to the main residence exemption as a dwelling was never constructed on your vacant block of land.
The only situation where the main residence exemption can apply to a CGT event that happens to vacant land is where a CGT event happens to vacant land after a dwelling that was your main residence is accidentally destroyed. In your case, the dwelling never existed and therefore this exemption does not apply to you.
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