Tax Tip 107: CGT exemption not stay in newly constructed house for 3 months

Tax Tip: CGT exemption when not staying in a newly constructed house for 3 months


In a recent tip I explained how the main residence exemption can apply to vacant land and be backdated up to 4 years prior when a house is constructed and lived in for at least 3 months.
Tax Tip 99: Vacant Land and the CGT Exemption

The ATO accepts (in ATO ID 2006/189) that a person can reside in the house, recently constructed on vacant land, for less than 3 months and then apply the 6 year absence rule to exceed the 3 month period.

For the 6 year rule see: Tax Tip 23: The 6 year Absent from Main Residence Rule

The example the ATO gives:

With the ATO accepting the house as the main residence from the date the land was purchased, even though they did not live in the house for the full 3 months.

Also this is further evidence that there is no minimum requirement to live in a property for a certain period before moving out and applying the 6 year rule. I have heard accountants suggest a minimum of 3 or 6 or even 12 months being needed, but there is no legal basis for this.

See
ATO ID 2006/189 Income tax Capital gains tax: main residence - 3 month period - extension of actual period by absence rule
ATO ID 2006/189 - Capital gains tax: main residence - 3 month period - extension of actual period by absence rule

 

This is a complex exemption and one that needs tax advice. The extension of the 2.5 months to pass the three months works where the property was retained. Selling may pose a concern however and render the land and house liable to tax (two CGT assets)