Generally, if you build a house on land you already own, the land does not qualify for exemption until the dwelling becomes your main residence. However, you can choose to treat land as your main residence for up to four (4) years before the house becomes your main residence.
You can choose the have this exemption apply if you purchase land and you:
- Build a house on the land; or
- Repair or renovate an existing dwelling on the land; or
- Finish a partly constructed dwelling on the land.
There are conditions that you must satisfy before you can claim the exemption. You must finish building, repairing or renovating the house and then:
- Move into the house as soon as practicable after it is finished; and
- Continue to use the house as your main residence for at least three (3) months after it becomes your main residence.
The land, including the house that is being built, renovated, repaired or finished on it, is exempt for the shorter of the following periods:
- The four-year period immediately before the date the dwelling becomes your main residence
- The period between the date you purchased the land and the date the house becomes your main residence.
The example below demonstrates how this rule applies:
Grant bought vacant land on which he intended to build a new home in September 2004. He bought his previous home in November 1991.
Grant finished building his new home in September 2009. He moved into it in October 2009, which was as soon as practicable after completion. He sold his previous home in October 2009.
Grant can treat the new home as his main residence from October 2005. In these circumstances, the main residence exemption applies for the period of four (4) years immediately before the date the new home actually becomes his main residence. He can also claim the exemption for his previous home from November 1991 to October 2005.
Both homes are also exempt from April 2009 to October 2009, the date Grant disposed of the old home.
Next month we will continue our focus on CGT and real estate.