There are a few tricks when it comes to capital gains tax and building a house on vacant land.
The vacant land can be treated as a main residence (therefore exempt from CGT) prior to the time you build, subject to a few conditions;
1) Within 4 years you construct your home
2) You move in as soon as practically possible
3) You live in the property for at least 3 months
4) Land is less than 2 hectares (20,000 square meters, 4.942 Acres)
The usual other rules apply such as not having more than one main residence at a time.
How do you make this election?
You don’t. When you ultimately sell your home you decide on how to treat the capital gain calculation. This means you will have the benefit of hindsight.
Pro Tip – Caution
Moving in as soon as possible is important. If you are overseas at the time the house is finished the ATO have deemed that not to be considered as soon as practically possible. The ATO will often consider ‘practical completion’ by a builder to be indicative of the time you can move in.
Author: Heather Cox
Email: heather@faj.com.au
