The Main Residence is generally exempt from CGT. Land cannot be a main residence unless there is a dwelling on that land, there is an exemption for demolishing the main residence and building a new property with a few conditions It must have been your main residence before the demolition and It must be complete within 4 years and You must live in, as your main residence, the completed property for at least 3 months, and claim no other property during this time If all these conditions are met the main residence exemption can continue to apply even though you will be living elsewhere during construction. But where you split the land and end up with 2 houses the main residence exemption can only apply to one of those houses. The portion of the land and construction cost for the new house cannot be eligible for the main residence exemption as you would have already claimed this on the other property. section 118-110 of the ITAA 1997. All this assumes you are not a ‘developer’.