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Edited version of private ruling
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Ruling
Subject: Capital gains tax (CGT) - main residence exemption
Will the gain on the disposal of vacant land be exempt from CGT due to the main residence exemption?
No.
This ruling applies for the following period
Year ending 30 June 2010
The scheme commenced on
1 July 2007
Relevant facts
You resided with your family at a dwelling.
You purchased vacant land with a view to building a dwelling.
You sold your current dwelling
Due to illness you were unable to commence building the dwelling on the vacant land.
You sold the vacant land.
The disposal of the vacant realised a capital gain
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Section 118-115
Income Tax Assessment Act 1997 Section 102-20
Reasons for decision
Main Residence exemption
You make a capital gain or capital loss if a CGT event happens. For most CGT events your capital gain is the difference between your capital proceeds and the cost base of your CGT asset.
The disposal of the vacant land triggered CGT event A1.
To get the full exemption from CGT through the main residence exemption, the following criteria must be met.
The dwelling must have been your home for the whole period you owned it.
You must not have used the dwelling to produce assessable income and any land on which the dwelling is situated must be two hectares or less.
A dwelling is anything that is used wholly or mainly for residential accommodation. Examples of a dwelling are - a home or cottage, an apartment or flat, a strata title unit, a unit in a retirement village a caravan, house boat or other mobile home.
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. Due to illness you did not build a dwelling on the vacant land as a result the vacant land did not become your main residence. Whilst we understand the circumstances that prevented you from building a dwelling on the vacant land , the law in relation to the main residence exemption is quite explicit. The main residence exemption is only available if a dwelling is built on the land. As you did not build a dwelling the capital gain made on the disposal of the vacant land is not exempt.