Bob Lived in a Property for 10 Years and Got No Main Residence Exemption

Bob purchased a property, lived in it as his main residence, built two townhouses, planned to live in one and then finds out he isn't eligible for the main residence exemption.

What happened Bob ?

Bob has a large block which he subdivides into two and builds two new townhouses. His plan was to move into one of the townhouses and make it his main residence.

Due to some unforeseen circumstances he instead had to sell both properties. He didn't move into either of the properties.

Bob gets a nasty shock when he finds out that the main residence exemption doesn't apply.

 

Holy Mackerel.

Maybe he should have sold the property to a related entity prior to developing?

 

Where the asset is a dwelling that you have treated as your main residence for your entire ownership period any capital gain or loss realised on the disposal is disregarded in accordance with section 118-110 of the ITAA 1997.

This exemption is known as the main residence exemption from CGT.

If the dwelling is used as your main residence for only part of the ownership period, you may be entitled to a partial exemption from CGT on its disposal.

The main residence usage of an original dwelling which is demolished or destroyed, will not normally count towards an exemption for the new dwelling(s) if the new dwelling constructed on the vacant land is not used as a main residence.

In Bob's case, he demolished a property which was his main residence for part of his ownership period.

On the vacant land he built two townhouses, none of which will became his main residence.

Consequently, the main residence usage of the previous dwelling will be lost and not count for the purposes of calculating CGT on the disposal of the townhouses.

Therefore, he can not claim a partial exemption from CGT on the sale of the newly constructed townhouses.

Ouch !! Bob could have planned this prior to undertaking the development and saved himself a lot of tax !!

Hehe

 

i wonder who wrote that