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Edited version of private ruling
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Ruling
Subject: Capital Gains Tax - Sale of land
Question:
Will you be able to disregard any capital gain you make on the disposal of your vacant block of land?
Answer: No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
The scheme that is the subject of the ruling:
Your spouse purchased a vacant block of land.
No house was built on this land.
You sold the land.
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 118-150.
Explanation (This does not form part of the ruling)
A capital gain or capital loss may arise if a capital gains tax event (CGT event) happens to a capital gains tax asset (CGT asset). The most common CGT event is CGT event A1 and this occurs when an entity disposes of the ownership interest in an asset. The sale of vacant land would be considered to be a CGT event A1.
Under certain circumstances, you may be able to disregard a capital gain or capital loss that is made on the sale of an asset. For example, you can ignore a capital gain or capital loss from a CGT event that happens to a dwelling that is your main residence. The exemption is also extended to include up to 2 hectares of land that is adjacent to the dwelling.
The main residence exemption can be applied to vacant land owned by a taxpayer in some circumstances. This can only happen if a dwelling on the property was the main residence of the taxpayer.
The main residence exemption can apply to the sale of vacant land where it is sold after the accidental destruction of a main residence that was sited on it, or when land is compulsory acquired. There are no other provisions that provide an exemption for a capital gain or capital loss due to the sale of vacant land.
A mere intention to construct a dwelling as your main residence without actually doing so is insufficient to obtain the exemption.
In your case CGT event A1 occurred when you sold the vacant land.
Regardless of the intentions that you held when you bought the block of land, you are not selling a dwelling with the land, nor are you selling a vacant block of land on which an existing dwelling was destroyed, nor was any part of the land compulsorily acquired. As you do not meet any of the necessary conditions to be eligible for any of the exemptions on the disposal of vacant land, you will not be able to disregard any capital gain made on the disposal of the vacant land.
Therefore, CGT event A1 occurred when you disposed of the vacant land and you must include any capital gain made on the disposal of the vacant land in your income tax return.