1 For the purposes of paragraph 118-110(1)(b) and paragraph 118-185(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997), can Person A make a choice pursuant to subsection 118-150(2) of the ITAA 1997 to treat the dwelling on Property A as their main residence from the time he first had an ownership interest in the land on which that dwelling was built?
1 Yes. This ruling applies for the following periods: Income years ending 30 June 20XX Income years ending 30 June 20XX Income years ending 30 June 20XX
1. Person A entered into a contract to acquire the Original Property in November 20XX for $X. The contract for the acquisition of the Original Property was settled on X February 20XX. 2. The acquisition of the Original Property was part-funded by a 30-year bank loan. The intended purpose specified on the loan agreement was 'owner occupied'. 3. The dwelling on the Original Property (Original Dwelling) was in a severely deteriorated condition with structural issues such that it could not be safely repaired and required a full demolition and reconstruction. 4. Person A and their family therefore did not reside in the Original Dwelling at any time. 5. Given the condition of the Original Dwelling, Person A entered into a residential tenancy agreement (as tenant) for Property Z in November 20XX for their family to reside in. This agreement covered the period X December 20XX to X December 20XX but Person A and their family continued to reside in this property until X January 20XX.
6. The Original Property was not purchased with any permits in relation to the demolition of the Original Dwelling, construction of a replacement dwelling or subdivision of the Original Property. 7. A complying development certificate outlining the demolition of existing structures and construction of a new 2-storey attached dual occupancy was lodged with the council in February 20XX. According to Person A, the construction of a duplex better suited their family's long-term residential needs. 8. Approval for commencement of the building work, including the demolition of the Original Dwelling, was granted for X March 20XX. 9. Construction of the duplex was completed in December 20XX. The cost of the construction was $Y which Person A funded from personal savings accumulated overseas prior to immigrating to Australia. 10. The occupancy certificate for the newly constructed duplex was issued to Person A by a registered certifier on X May 20XX.
11. Having been issued the occupancy certificate on X May 20XX, Person A submitted an application to subdivide the Original Property on the same date. The Original Property was subdivided on X June 20XX into Property A and Property B. 12. Despite having been issued the occupancy certificate on X May 20XX, according to Person A he and their family resided in the dwelling constructed on Property B from X January 20XX. 13. According to Person A, a decision to sell Property B was made shortly thereafter due to rising construction costs, increased mortgage interest rates and the financial burden of raising young children. 14. Person A entered into a contract for the disposal of Property B on X May 20XX for $Z. The contract for the disposal of Property B was settled on X July 20XX. The profit realised by Person A from the disposal of Property B was declared as a capital gain in their 20XX income tax return. 15. Person A and their family moved out of the dwelling on Property B and into the dwelling on Property A on X May 20XX. 16. On 17 September 2025, Person A confirmed that:
• the dwelling at Property A was intended to be their family's home long-term; • he had no plan to sell Property A or move out of the dwelling on Property A; and • he anticipated residing in the dwelling for at least the next 3 years. 17. The dwelling at Property A has not been, and is not, used for the purpose of producing assessable income. 18. Person A has not treated any dwelling (including the dwelling on Property B) as their main residence for the period X February 20XX to X May 20XX, other than the dwelling on Property A. 19. As at the date of this ruling Person A holds an interest in one other property, Property C, which he purchased jointly with their spouse Person A on 14 March 20XX. The acquisition of Property C was funded via a bank loan.
20. A complying development certificate was approved for Property C in December 20XX for the 'demolition of existing buildings, construction of a Dual Occupancy, swimming pool and cabana'. According to Person A, Property C was purchased as an investment property and is currently leased. The complying development certificate application was merely lodged to "maintain flexibility for potential future development or sale. At present, there is no active intention to commence the approved works", nor to sell this property. 21. Other than for Property B, Person A has disposed of 3 other properties since the 20XXincome year. These are: • Property D purchased in September 20XX and sold in November 20XX; • Property E purchased in November 20XX and sold in May 20XX; and • Property F, purchased in September 20XX and sold in August 20XX.
22. The dwelling on Property F was demolished and replaced with a newly constructed dwelling. Person A and their family resided in the new dwelling at Property F and considered it their main residence from December 20XX until July 20XX. The profit realised by Person A from the disposal of Property F during the 20XX income year was treated as a capital gain and disregarded in full pursuant to the main residence exemption under Subdivision 118-B of the ITAA 1997. 23. No other subdivision activities or property development activities have been undertaken by Person A or any entities related to Person A. 24. Person A derives a salary from their employment as a site supervisor with Company A. Company A's business activities comprise of tiling and building. 25. Person A is the sole director of Company B. Company B has been engaged in tiling works and since August 20XX has been a licensed building developer. Company B has not been involved in relation to any of the properties in which Person A has had an interest.
Income Tax Assessment Act 1997 section 6-5 Income Tax Assessment Act 1997 section 102-20 Income Tax Assessment Act 1997 section 104-10 Income Tax Assessment Act 1997 subsection 104-10(3) Income Tax Assessment Act 1997 section 108-5 Income Tax Assessment Act 1997 Subdivision 118-B Income Tax Assessment Act 1997 section 118-110 Income Tax Assessment Act 1997 subsection 118-110(1) Income Tax Assessment Act 1997 paragraph 118-110(1)(b) Income Tax Assessment Act 1997 subsection 118-110(4) Income Tax Assessment Act 1997 subsection 118-110(5) Income Tax Assessment Act 1997 section 118-125 Income Tax Assessment Act 1997 paragraph 118-130(1)(b) Income Tax Assessment Act 1997 subsection 118-130(2) Income Tax Assessment Act 1997 section 118-135 Income Tax Assessment Act 1997 section 118-150 Income Ta
All subsequent legislative references are to the ITAA 1997. Summary For the purposes of paragraph 118-110(1)(b) and paragraph 118-185(1)(b), Person A can make a choice pursuant to subsection 118-150(2) to treat the dwelling on Property A as their main residence from the time he first had an ownership interest in the land on which the dwelling was built (i.e. X February 20XX). Detailed reasoning Section 102-20 provides that you make a capital gain or capital loss if and only if a CGT event happens. CGT event A1 under section 104-10 occurs when you dispose of a CGT asset, i.e. when a change of beneficial ownership occurs from you to another entity. Land and buildings are CGT assets within the meaning of section 108-5. When a contract for the disposal is entered into, the time of the CGT event A1 is when you enter into the contract (subsection 104-10(3)). Subdivision 118-B determines the extent to which any capital gain or loss is ignored when a CGT event (including CGT event A1) happens to a dwelling that is your main residence.
Unless you are an 'excluded foreign resident' (defined in subsection 118-110(4)) at the time the CGT event happens, or a foreign resident who doesn't satisfy the 'life events test' in subsection 118-110(5) at the time the CGT event happens, subsection 118-110(1) disregards a capital gain or capital loss you make from a CGT event that happens to a CGT asset that is a dwelling or your ownership interest in it if: (a) you are an individual; and (b) the dwelling was your main residence throughout your ownership period; and (c) the interest did not pass to you from the estate of a deceased person. Unless you are an excluded foreign resident at the time the CGT event happens, or a foreign resident who doesn't satisfy the life events test in subsection 118-110(5) at the time the CGT event happens, subsection 118-185(1) states that 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 from the estate of a deceased person. Subsection 118-185(2) provides a formula to calculate your capital gain or capital loss under such circumstances as follows: CG or CL amount x Non-main residence days Days in your ownership period where: • 'CG or CL amount' is the capital gain or capital loss you would have made from the CGT event apart from Subdivision 118-B; and • 'Non-main residence days' is the number of days in your ownership period when the dwelling was not your main residence. For the main residence exemption to apply (in full under section 118-110 or partially under section 118-185), the relevant dwelling must be your main residence. There is no statutory definition of the term 'main residence' for the purposes of the exemption. Whether a dwelling is your main residence depends on the facts of each case and will be decided in light of all the relevant circumstances. The matter must be decided objectively. According to the ATO's Guide to capital gains tax 2025 , the following factors may be relevant in working out whether a dwelling is your main residence:
• the length of time you live there (there is no minimum time a person has to live in a home before it is considered to be their main residence) • whether your family lives there • whether you have moved your personal belongings into the home • the address to which your mail is delivered • your address on the electoral roll • the connection of services (for example, phone, gas or electricity) • your intention in occupying the dwelling. The term 'ownership period' is defined in section 118-125 as the period on or after 20 September 1985 when you had an ownership interest in the dwelling (or land on which the dwelling is later built). In the context of a dwelling that is not a flat or home unit, you have an ownership interest if you have a legal or equitable interest in the land on which it is erected (paragraph 118-130(1)(b)). In accordance with subsection 118-130(2), an individual has an ownership interest in a dwelling that they acquire under a contract from the time when they obtain legal ownership of it (unless they have a right to occupy the dwelling at an earlier time).
Section 118-135 states that if a dwelling becomes your main residence by the time it was first practicable for you to move into it after you acquired your ownership interest in it, the dwelling is treated as your main residence from when you acquired the interest until it actually became your main residence. If you do not move into the dwelling as soon as practicable after you acquire your ownership interest then the dwelling will be treated as your main residence from the time you actually moved into it. However, subsection 118-150(2) enables the main residence exemption to be extended by allowing you to choose that a dwelling being built was your main residence from the time you acquired your ownership interest in the land rather than from the time you commenced using the dwelling as your main residence, provided that: • a dwelling on the land that you construct becomes your main residence as soon as practicable after the work has finished; and • it continues to be your main residence for at least 3 months (subsection 118-150(3)). There is a time limit during which the choice under section 118-150 can operate. This is the shorter of:
• 4 years, or a longer time allowed by the Commissioner, before the dwelling becomes your main residence; and • the period starting when you acquired your ownership interest in the land and ending when the dwelling becomes your main residence (subsection 118-150(4)). The phrase 'as soon as practicable' is not defined for the purposes of section 118-150. Whether the dwelling becomes the taxpayer's main residence as soon as practicable after its construction is finished depends on the facts of each case. Taxation Determination TD 92/147 states that the following factors are relevant in ascertaining whether the construction of a dwelling is finished: (i) the date the Certificate of Occupancy (if applicable) is issued (ii) the date final building inspection approval is given (iii) the date the dwelling becomes structurally complete (iv) the connection of services e.g. electricity, gas, etc. Application to Person A's circumstances
Person A has a legal interest in the land on which Property A is erected and therefore has an ownership interest in the dwelling on that land pursuant to paragraph 118-130(1)(b). Pursuant to subsection 118-130(2), Person A's ownership interest in the dwelling on Property A began from the time he obtained legal ownership of it, on X February 20XX. In accordance with section 118-125, Person A's ownership period of the dwelling on Property A began on X February 20XX; the date on which he first had an ownership interest in the land on which the dwelling was later built. Given: • the dwelling on the Original Property was uninhabitable at the time of its acquisition; • demolition of that dwelling and the construction of a new dwelling began on or around X March 2023, the date on which commencement of those works was permitted; • the occupancy certificate for the dwelling was issued on X May 20XX; and • Person A and their family moved into the dwelling on the same date (X May 20XX),
it is accepted that the dwelling on Property A became Person A's main residence as soon as practicable after the dwelling was built, and continued to be their main residence for at least 3 months, such that (pursuant to subsection 118-150(2)) he can choose to apply Subdivision 118-B (including paragraphs 118-110(1)(b) and 118-185(1)(b)) as if the dwelling that he built on Property A was their main residence from the time he acquired the ownership interest (on X February 20XX) rather than from the time he commenced using the dwelling as their main residence (on X May 20XX).