Tax Tip 205: CGT on Main Residence when land over 2 Hectares

Discussion in 'Accounting & Tax' started by Terry_w, 27th May, 2019.

Join Australia's most dynamic and respected property investment community
  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    9th Jun, 2006
    Australia wide
    I had a client recently who was selling this main residence. He was shocked when I told him it would not be fully CGT exempt as it was about 8 acres in size.

    The main residence CGT only applies to a dwelling on land of up to 2 hectares in size. So when the land is larger than 2 hectares only part of the property will qualify for the main residence exemption.

    See s118-120(3) ITAA97.

    INCOME TAX ASSESSMENT ACT 1997 - SECT 118.120 Extension to adjacent land etc.

    Note that the 2 hectares can be selected on the most valuable parts of the land which need to be adjacent to each other. For example you might have the land under the house on one side and the land under a shed way down the back, but not count the land in between them.

    See TD 1999/67

    Legal Database

    Which includes this diagram:

    adjacent land Capture.PNG
    craigc and Simon Moore like this.
  2. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    18th Jun, 2015
    A strategy that is best used is to value the worst portion of the lot to leave the best part within the 2Ha. eg A creek running through the property, a rocky outcrop. Remembering that the 2Ha area must include the home and its adjacent structures to meet the main residence exemption.

    A land valuer is best consulted for this purpose.
    Last edited: 27th May, 2019