Subdivision 118-B-Main residence
118-100 What this Subdivision is about
You can ignore a capital gain or capital loss you make from a CGT event that happens to a dwelling that is your main residence.
However, this exemption may not apply in full if:
• it was your main residence during part only of your ownership period; or
• it was used for the purpose of producing assessable income.
There are special rules for dwellings passed from, or owned by a trustee of, a deceased estate.
118-105 Map of this Subdivision
Basic exemption and concepts
118-110 Basic exemption
118-115 Meaning of dwelling
118-120 Extension to adjacent land
118-125 Meaning of ownership period
118-130 Meaning of ownership interest in land or a dwelling
Rules that may extend the exemption
118-135 Moving into a dwelling
118-140 Changing main residences
118-145 Absences
118-150 If you build, repair or renovate a dwelling
118-155 Where individual referred to in section 118-45 dies
118-160 Destruction of dwelling and sale of land
Rules that may limit the exemption
118-165 Separate CGT event for adjacent land or other structures
118-170 Spouse having different main residence
118-175 Dependent child having different main residence
118-180 Acquisition of dwelling from company or trust on marriage breakdown-roll-over provision applying
Partial exemption rules
118-185 Partial exemption where dwelling was your main residence during part only of ownership period
118-190 Use of dwelling for producing assessable income
118-192 Special rule for first use to produce income
Dwellings acquired from deceased estates
118-195 Exemption-dwelling acquired from a deceased estate
118-200 Partial exemption for deceased estate dwellings
118-205 Adjustment if dwelling inherited from deceased individual
118-210 Trustee acquiring dwelling under will
118-105 Map of this Subdivision
(1) A
(a) you are an individual; and
(b) the dwelling was your main residence throughout your
(c) the interest did not
*pass to you as a beneficiary in, and you did not *acquire it as a trustee of, the estate of a deceased person.Note 1: You may make a capital gain or capital loss even though you comply with this section if the dwelling was used for the purpose of producing assessable income: see section 118-190.
Note 2: There is a separate exemption for beneficiaries and trustees of deceased estates: see section 118-195.
(2) Only these
*CGT events are relevant:(a) CGT events A1, B1, C1, C2, E1, E2, F2, I1, I2, K3, K4 and K6; and
(b) CGT event H1 if it happens as part of a transaction leading up to one of the events specified in paragraph (a) happening.
Note: The full list of CGT events is in section 104-5.
(1) A dwelling includes:
(a) a unit of accommodation that:
(i) is a building or is contained in a building; and
(ii) consists wholly or mainly of residential accommodation; and
(b) a unit of accommodation that is a caravan, houseboat or other mobile home; and
(c) any land immediately under the unit of accommodation.
(2) However, a dwelling does not include any land adjacent to a building.
private or domestic purposes in association with the flat or home unit.
118-120 Extension to adjacent land
(1) The exemption extends to land that is adjacent to the *dwelling (if the same *CGT event happens to the land or your *ownership interest in it) to the extent that you used the land primarily for private or domestic purposes in association with the dwelling.
(2) The maximum area of land covered by the exemption (including the area of the land on which the *dwelling is built) is 2 hectares.
(3) The exemption also extends, for a flat or home unit, to a garage, storeroom or other structure that is associated with the flat or home unit (if the same *CGT event happens to the structure or your *ownership interest in it). However, it extends only to the extent that you used the structure primarily for
118-125 Meaning of ownership period
Your ownership period of a *dwelling is the period on or after 20 September 1985 when you had an *ownership interest in:
(a) the dwelling; or
(b) land (*acquired on or after 20 September 1985) on which the dwelling is later built.
118-130 Meaning of ownership interest in land or a dwelling
(1) You have an ownership interest in land or a *dwelling if:
(a) for land-you have a legal or equitable interest in it or a right to occupy it; or
(b) for a dwelling that is not a flat or home unit-you have a legal or equitable interest in the land on which it is erected, or a licence or right to occupy it; or
(c) for a flat or home unit-you have:
(i) a legal or equitable interest in a *stratum unit in it; or
(ii) a licence or right to occupy it; or
(iii) a *share in a company that owns a legal or equitable interest in the land on which the flat or home unit is erected and that gives you to a right to occupy it.
(2) For land or a *dwelling that you *acquire under a contract, you have an ownership interest in it from:
(a) the time when you obtain legal ownership of it; or
(b) if the contract or a related contract gives you a right to occupy it at an earlier time-the earlier time.
(3) For land or a *dwelling where you have a contract for the happening of the *CGT event, you have an ownership interest in it until your legal ownership of it ends.
Rules that may extend the exemption
118-135 Moving into a dwelling
If you don't move into a *dwelling immediately after you *acquire your *ownership interest in it, it is treated as being your main residence from the time of the acquisition until the time when it was first practicable for you to move into it.
118-140 Changing main residences
(1) If you *acquire an *ownership interest in a *dwelling that is to become your main residence and you still have your ownership interest in your existing main residence, both dwellings are treated as your main residence for the shorter of:
(a) 6 months ending when your ownership interest in your existing main residence ends; or
(b) the period between the acquisition of the new ownership interest and the time when the ownership interest referred to in paragraph (a) ends.
(2) Subsection (1) only applies if:
(a) your existing main residence was your main residence for a continuous period of at least 3 months in the 12 months ending when your ownership interest in it ends; and
(b) your existing main residence, and any adjacent land, garage, storeroom or other structure to which the exemption extends under section 118-120, was not used for the *purpose of producing assessable income in any part of that 12 month period when it was not your main residence.
(1) If a *dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence.
(2) If you use the *dwelling for the *purpose of producing assessable income, the maximum period that you can treat it as your main residence under this section while you use it for that purpose is 6 years. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence.
(3) If you do not use the *dwelling for that purpose, you can treat it as your main residence under this section indefinitely.
(4) If you make the choice, you cannot treat any other *dwelling as your main residence while you apply this section, except if section 118-140 (about changing main residences) applies.
Example: You live in a house for 3 years. You are posted overseas for 5 years and you rent it out during your absence. On your return you move back into it for 2 years. You are then posted overseas again for 4 years (again renting it out), at the end of which you sell the house.
You have not treated any other dwelling as your main residence during your absences.
You may choose to continue to treat the house as your main residence during both absences because each absence is less than 6 years.
You can make this choice when preparing your income tax return for the income year in which you sold the house.
118-150 If you build, repair or renovate a dwelling
(1) This section applies to land in which you have an *ownership interest (except a life interest) if you build a *dwelling on the land, or repair, renovate or finish building a dwelling on the land.
(2) You can choose to apply this Subdivision as if the *dwelling that you are building, repairing or renovating on the land were your main residence from the time you *acquired the *ownership interest.
(3) You can make the choice only if:
(a) a *dwelling on the land that you construct, repair or renovate becomes your main residence as soon as practicable after the work is finished; and
(b) it continues to be your main residence for at least 3 months.
(4) There is a time limit during which the choice can operate. This is the shorter of:
(a) 4 years before the *dwelling becomes your main residence; or
(b) the period starting when you *acquired your *ownership interest in the land and ending when the dwelling becomes your main residence.
(5) If there was already a *dwelling on the land when you *acquired your *ownership interest and you or someone else occupied it after that time, the period in subsection (2) and paragraph (4)(b) starts when the dwelling ceased to be occupied so that it could be repaired or renovated.
(6) Once you make the choice, no other *dwelling can be treated as your main residence during the period referred to in subsection (4), except if section 118-140 (about changing main residences) applies.
118-155 Where individual referred to in section 118-150 dies
(1) This section applies if the individual referred to in subsection 118-150(1) dies:
(a) after the work began, or the individual entered into a contract for it to be done, but before it was finished; or
(b) after the work was finished but before it was practicable for the *dwelling to become the individual's main residence; or
(c) during the period of 3 months referred to in paragraph 118-150(3)(b).
(2) If the individual owned the interest in the land as a joint tenant, the surviving joint tenant or, if none, the trustee of the individual's estate, can choose to apply this Subdivision as if the *dwelling were the main residence of the individual:
(a) when the individual died; and
(b) for the shorter of:
(i) 4 years before the individual's death; or
(ii) the period starting when the individual *acquired the interest in the land and ending when the individual died.
(3) If there was already a *dwelling on the land when the individual *acquired the interest in the land and someone occupied it after that time, the period in subparagraph (2)(b)(ii) starts when the dwelling ceased to be occupied so that it could be repaired or renovated.
(4) If the *dwelling is treated as the deceased's main residence under this section, no other dwelling can be treated as the deceased's main residence at the same time.
118-160 Destruction of dwelling and sale of land
(1) This section applies if a *dwelling that is your main residence is accidentally destroyed and a *CGT event happens in relation to the land on which it was built without you erecting another dwelling on the land.
(2) You can choose to apply this Subdivision to the land as if, from the time of the destruction until your *ownership interest in the land ends, the *dwelling had not been destroyed and were your main residence.
(3) If you do so, you cannot treat any other *dwelling as your main residence during that period, except under section 118-140 (about changing main residences).
Rules that may limit the exemption
118-165 Separate CGT event for adjacent land or other structures
The exemption does not apply to a *CGT event that happens in relation to land, or a garage, storeroom or other structure, to which the exemption can extend under section 118-120 (about adjacent land) if that event does not also happen in relation to the *dwelling or your *ownership interest in it.
118-170 Spouse having different main residence
(1) If, during a period, a *dwelling is your main residence and another *dwelling is the main residence of your *spouse (except a spouse living permanently separately and apart from you), you and your spouse must either:
(a) choose one of the dwellings as the main residence of both of you for the period; or
(b) nominate the different dwellings as your main residences for the period.
(2) If you nominate the different *dwellings as your main residences for the period, you split the exemption in accordance with subsections (3) and (4).
(3) If your interest in the *dwelling you chose was not, during the period, more than half of the total interests in the dwelling, the dwelling is taken to have been your main residence during the period. Otherwise, the dwelling is taken to have been your main residence for half of the period.
(4) If your *spouse's interest in the *dwelling your spouse chose was not, during the period, more than half of the total interests in the dwelling, the dwelling is taken to have been your spouse's main residence during the period. Otherwise, the dwelling is taken to have been your spouse's main residence for half of the period.
Example: You and your spouse own a town house as tenants in common in equal shares. You and your spouse also own a beach house as tenants in common, with your interest being 30% and your spouse's 70%. From 1 July 1999, you live mainly in the town house and your spouse lives mainly in the beach house. On 1 July 2000 you and your spouse dispose of both dwellings.
For the period 1 July 1999-30 June 2000 you nominate the town house as your main residence and your spouse nominates the beach house. The town house is taken to be your main residence during the period. The beach house is taken to be your spouse's main residence during half the period.
118-175 Dependent child having different main residence
If, at a particular time, a *dwelling is your main residence and another *dwelling is the main residence of a *child of yours who is under 18 and is dependent on you for economic support, you must choose one of them as the main residence of both of you.
118-180 Acquisition of dwelling from company or trust on marriage breakdown-roll-over provision applying
(1) This Subdivision applies to you as if you owned an *ownership interest in land or a dwelling during a period when it was actually owned by a company or trustee if:
(a) you *acquired the interest from the company or trustee; and
(b) it was acquired by the company or trustee on or after 20 September 1985 ; and
(c) a roll-over was available to the company or trustee under Subdivision 126-A.
(2) If subsection (1) applies to a *dwelling, it cannot be treated as your main residence during the period, despite other provisions of this Subdivision that would allow you to treat it as your main residence during the period.
118-185 Partial exemption where dwelling was your main residence during part only of ownership period
(1) You get only a partial exemption for a *CGT event that happens in relation to a *dwelling or your *ownership interest in it if:
(a) you are an individual; and
(b) the dwelling was your main residence for part only of your *ownership period; and
(c) the interest did not *pass to you as a beneficiary in, and you did not *acquire it as a trustee of, the estate of a deceased person.
(2) You calculate your *capital gain or *capital loss using the formula:
where:
CG or CL amount is the
*capital gain or *capital loss you would have made from the *CGT event apart from this Subdivision.non-main residence days is the number of days in your
*ownership period when the *dwelling was not your main residence.Note: The capital gain or loss may be further adjusted if the dwelling was used to produce assessable income: see section 118-190.
Example: You bought a house in July 1990 and moved in immediately. In July 1993, you moved out and began to rent it. You sold it in July 2000, making (apart from this Subdivision) a capital gain of $10,000.
You choose to continue to treat the dwelling as your main residence under section 118-145 (about absences) for the first 6 of the 7 years during which you rented the house out.
Under this section, you will be taken to have made a capital gain of:
118-190 Use of dwelling for producing assessable income
(1) You get only a partial exemption for a *CGT event that happens in relation to a *dwelling or your *ownership interest in it if:
(a) apart from this section, because the dwelling was your main residence or someone else's during a period:
(i) you would not make a *capital gain or *capital loss from the event; or
(ii) you would make a lesser capital gain or loss than if this Subdivision had not applied; and
(b) the dwelling, or any adjacent land, garage, storeroom or other structure to which the exemption extends under section 118-120, was used for the *purpose of producing assessable income during all or a part of that period; and
(c) if you had incurred interest on money borrowed to *acquire the dwelling, land or structure or your ownership interest in it, you could have deducted some or all of that interest.
Example: You acquire a house as a beneficiary in a deceased estate, rent it out for 12 months and sell it within 2 years of the deceased's death. You can ignore the rental because the exemption does not require the house to be your main residence during the 2 years after the death.
(2) The
*capital gain or *capital loss that you would have made apart from this section from the *CGT event is increased by an amount that is reasonable having regard to the extent to which you would have been able to deduct that interest.(3) However, you ignore any use of the
*dwelling, land or structure for the *purpose of producing assessable income during any period that you continue to treat it as your main residence under section 118-145 (about absences) to the extent that any part of it was not used for that purpose just before it last ceased to be your main residence.Example: To continue the example from section 118-185, assume that, when you moved in, you used 1/4 of the house as a doctor's surgery.
Under section 118-185, your capital gain was $1,000.
Under this section, it would be reasonable to add an amount of:
You have a total capital gain of $3,250 on the sale of the house.
(4) If a
*dwelling or your *ownership interest in a dwelling *passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate, you ignore any use of the *dwelling for the *purpose of producing assessable income before the deceased's death if:(a) the dwelling was the deceased's main residence just before the death; and
(b) it was not being used for that purpose just before the death, or any use for that purpose just before the death was ignored because of subsection (3).
118-192 Special rule for first use to produce income
(1) There is a special rule if:
(a) you would get only a partial exemption under this Division for a
(b) you would have got a full exemption under this Division if the CGT event had happened just before the first time (the income time) it was used for that purpose during your ownership period.
(2) You are taken to have
*acquired the *dwelling or your *ownership interest at the income time for its market value at that time.(3) If your
*ownership interest in the *dwelling *passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate and the *CGT event did not happen within 2 years of the deceased' death, you apply this Subdivision as if:(a) you had
(b) for applying the formula in section 118-185, your non-main residence days were the number of days in your
*ownership period when the dwelling was not the main residence of an individual referred to in item 2, column 3 of the table in section 118-195.Dwellings acquired from deceased estates
118-195 Exemption-dwelling acquired from a deceased estate
(1) A *capital gain or *capital loss you make from a *CGT event that happens in relation to a *dwelling or your *ownership interest in it is disregarded if:
(a) you are an individual and the interest *passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and
(b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied.
|
Beneficiary or trustee of deceased estate acquiring interest |
||
|
Item |
One of these items is satisfied |
And also one of these items |
|
1 |
the deceased *acquired the *ownership interest on or after 20 September 1985, the *dwelling was the deceased's main residence just before the deceased's death and was not then being used for the *purpose of producing assessable income |
your *ownership interest ends within 2 years of the deceased's death |
|
2 |
the deceased *acquired the *ownership interest before 20 September 1985 |
the *dwelling was, from the deceased's death until your *ownership interest ends, the main residence of one or more of:(a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the |
Note 1: You may make a capital gain or capital loss if the dwelling was used for the purpose of producing assessable income: see section 118-190.
Note 2: In some cases the use of a dwelling to produce assessable income can be disregarded: see sections 118-45 and 118-190.
(2) Only these
*CGT events are relevant:(a) CGT events A1, B1, C1, C2, E1, E2, F2, I1, I2, K3, K4 and K6; and
(b) CGT event H1 if it happens as part of a transaction leading up to one of the events specified in paragraph (a) happening.
Note: The full list of CGT events is in section 104-5.
118-200 Partial exemption for deceased estate dwellings
(1) You get only a partial exemption (or no exemption) if:
(a) you are an individual and your *ownership interest in a *dwelling *passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and
(b) section 118-195 does not apply.
(2) You calculate your *capital gain or *capital loss using the formula:
where:
CG or CL amount is the
*capital gain or *capital loss you would have made from the *CGT event apart from this Subdivision.non-main residence days is the sum of:
(a) if the deceased
(b) the number of days in the period from the death until your ownership interest ends when the dwelling was not the main residence of an individual referred to in item 2, column 3 of the table in section 118-195.
total days is:
(a) if the deceased
(b) if the deceased acquired the ownership interest on or after that day-the number of days in the period from the acquisition of the dwelling by the deceased until your ownership interest ends.
(3) However, if the deceased
*acquired the *ownership interest on or after 20 September 1985 and your ownership interest ends within 2 years of the deceased's death and you get a more favourable result by doing so, you can adjust the formula by ignoring any non-main residence days and total days in the period from the deceased's death until your ownership interest ended.Note 1: The formula in this section will be adjusted (or further adjusted) under section 118-205 if the deceased acquired the dwelling through a deceased estate.
Note 2: There may be a further adjustment if the dwelling was used for the purpose of producing assessable income: see section 118-190.
(4) You ignore any non-main residence days before the deceased's death if:
(a) the
(b) the dwelling, or any adjacent land, garage, storeroom or other structure to which the exemption extends under section 118-120, was not being used for the
*purpose of producing assessable income just before the death, or any use for that purpose just before the death was ignored because of subsection 118-190(3).118-205 Adjustment if dwelling inherited from deceased individual
(1) You must adjust the formula in subsection 118-200(2) if the
*ownership interest of the deceased individual referred to in section 118-200 (the most recently deceased) *passed to the individual on or after 20 September 1985 as a beneficiary in, or the individual owned it as trustee of, a deceased estate.Note: Any gains or losses of individuals earlier in the inheritance chain are included in the gain or loss you would have made apart from this Subdivision. This section adjusts the formula to take account of times when the dwelling was the main residence of the individuals.
(2) Add to the component total days in the formula the fewer of:
(a) the number of days between 20 September 1985 and the day when the interest
(b) the number of days between the time when an
*ownership interest in the *dwelling was last acquired on or after 20 September 1985 by an individual except as a beneficiary in a deceased estate or as trustee of a deceased estate and the day when the interest passed to or was acquired as trustee by the most recently deceased.(3) Add to the component non-main residence days in the formula the number of days in the period applicable under subsection (2) that the
*dwelling was not the main residence of one or more of:(a) an individual who owned the dwelling at the time of the individual's death; or
(b) an individual who, immediately before the death of an individual referred to in paragraph (a), was the spouse of that individual (except a spouse who was living permanently separately and apart from the individual); or
(c) an individual who had a right to occupy the dwelling under a will; or
(d) an individual to whom an
118-210 Trustee acquiring dwelling under will
(1) This section applies if you are the trustee of a deceased estate and, under the deceased's will, you
*acquire an *ownership interest in a *dwelling for occupation by an individual.(2) If a
*CGT event happens to the interest in relation to the individual and you receive no money or property for it:(a) a
(b) the first element of the
*dwelling's *cost base and *reduced cost base in the hands of the individual is its cost base and reduced cost base in your hands at the time of the event; and(c) the individual is taken to have
*acquired it when you did.(3) If:
(a) you receive money or property for the
(b) the dwelling was the main residence of the individual from the time you
*acquired the interest until the time of the event;you do not make a
*capital gain or *capital loss from the CGT event.(4) However, if the
*dwelling was the main residence of the individual during part only of that period, you make a *capital gain or *capital loss worked out using the formula:
where:
CG or CL amount is the
*capital gain or *capital loss you would have made from the *CGT event apart from this Subdivision.non-main residence days is the number of days in that period when the
*dwelling was not the individual's main residence.(5) Only these
*CGT events are relevant:(a) CGT events A1, B1, E1, E2 and F1; and
(b) CGT event H1 if it happens as part of a transaction leading up to one of the events specified in paragraph (a) happening.
Note: The full list of CGT events is in section 104-5.
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