Naturally, a taxpayer will assume that when they build a house, that building will not qualify for CGT exemption until it becomes that taxpayer’s “main residence”.
There is however a section of the regulations that allows that taxpayer to extend the period of the main residence exemption so that this is initiated during the period when they are building or repairing the dwelling and not living in it.
In part, this is enabled because the term “main residence” is not clinically defined in the legislation.
The ATO provides the following general guidance on the factors that may be relevant in working out whether a property is a taxpayer’s main residence:
the length of time you live there – there is no minimum time a person has to live in a home before it is considered to be their main residencewhether you and your family lives therewhether you have moved your personal belongings into the homethe address to which your mail is deliveredyour address on the electoral rollthe connection of services (for example, phone, gas or electricity)your intention in occupying the dwelling.
Generally, a mere intention to construct or occupy a dwelling as the taxpayer’s main residence – without actually doing so – is not sufficient to categorise the building as the taxpayer’s main residence.
The wiggle room with regard to the extension of the CGT-free period has to do with subsection s118-150(2), and a choice that can be made under this subsection. This can allow the taxpayer to treat the property as their main residence for CGT purposes prior to moving in, while the construction or renovation work is still being completed.
A recent Tax Determination (TD 2017/13) deals with this. The operation of this part of the legislation is also to be dealt with as part of the Monthly Tax Update webinar in early June (details below).
Land owned before CGT, but can a recent house built on it be CGT-free?
The June 2017 Monthly Tax Update dealt with the above issue, plus much more to do with CGT and other topics.
Recordings of these Monthy Tax Updates webinars are provided as part of the CPD+ service.
Land owned before CGT, but can a recent house built on it be CGT-free? Land owned before CGT, but can a recent house built on it be CGT-free? Land owned before CGT, but can a recent house built on it be CGT-free?
# [capital gains tax], [cgt], [main residence], [property 1985]
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