Edited version of private advice

Authorisation Number: 1051798314618

Date of advice: 27 January 2021

Ruling

Subject: Capital gains tax - main residence

Question

Will the Commissioner exercise his discretion under section 118-150 of the Income Tax Assessment Act 1997 to extend the four year period to the completion of your building on your property?

Answer

Yes. Having considered your circumstances and the relevant factors, the Commissioner will extend the four year period to the completion of the building. Further information about building and renovating your home can be found by searching 'QC 52192' on ato.gov.au

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

On XX August 20XX Person A and Person B (you) acquired a property in WA.

You paid $X for the property which settled on XX September 20XX.

You were married at the time of purchase.

The property consisted of XX square metres of land and a dwelling which had been constructed in the 19XXs. You resided in the dwelling as their main residence.

Several years later you determined they had the financial ability to demolish the existing dwelling and commence construction of a new dwelling on the land.

You rented a residential property to allow the old dwelling to be demolished which began in December 20XX.

Negotiations began thereafter with various prospective builders of the replacement dwelling.

Over the next couple of years Person A suffered several employment redundancies and as result no longer received a regular income, which they had at the time the decision had been made to demolish and rebuild. This limited the ability to finance the rebuild.

Person A's health also impacted the rebuild as they suffered a condition which required surgery. During this period Person A was unable to work and only received income protection insurance payments.

In December 20XX, you moved into another rental property to be closer to their childrens' school and intending to be closer to the planned building site.

On XX February 20XX a builder's contract was signed.

Shortly after you secured stable employment.

On XX October 20XX planning approval was granted.

On XX January 20XX a building permit was issued and building commenced shortly thereafter.

On XX February 20XX the builder handed over the keys to you.

You moved into the new dwelling as soon as practicable once the build was complete and lived there as your main residence.

Several years later you separated. Person A moved to an alternate residence.

The dwelling was sold for $X. Settlement occurred on XX June 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-135

Income Tax Assessment Act 1997 section 118-150