A flat or home unit often includes areas (for example, a laundry, storeroom or garage) that are physically separate from the flat or home unit. As long as these areas are used primarily for private or domestic purposes in association with the flat or home unit for the whole period you own it, they are exempt on the same basis as the flat or home unit is exempt.
However, if you dispose of one of these structures separately from the flat or home unit, they are not exempt.
Part exemption
Main residence for only part of the period you owned it
If a CGT event happens in relation to a dwelling you acquired on or after 20 September 1985 and that dwelling was not your main residence for the whole time you owned it, you get only a part exemption.
The part of the capital gain that is taxable is calculated as follows:
A × (B ÷ C)
Where:
A is total capital gain made from the CGT event
B is number of days in your ownership period when the dwelling was not your main residence
C total number of days in your ownership period
Example: Main residence for part of the ownership period
Andrew bought a house under a contract that was settled on 1 July 1990 and moved in immediately. On 1 July 1993, he moved out and began to rent out the house. He did not choose to treat the house as his main residence for the period after he moved out, although he could have done this under the continuing main residence status after dwelling ceases to be your main residence rule. The 'home first used to produce income' rule does not apply because Andrew used the home to produce income before 21 August 1996.
The contract for the sale of the house was settled on 1 July 2002 and Andrew made a capital gain of $10,000. As he is entitled to a part exemption, Andrew's capital gain is reduced as follows:
$10,000 × (3,288 days ÷ 4,384 days) = $7,500
As Andrew entered into the contract to acquire the house before 11.45am (by legal time in the ACT) on 21 September 1999 but the CGT event occurred after this date, Andrew can choose to use the discount method or the indexation method to calculate his capital gain.
End of exampleIf a dwelling was not your main residence for the whole time you owned it, some special rules may entitle you to a full exemption or extend the part exemption you would otherwise get. These rules apply to land or a dwelling if:
- you choose to treat the dwelling as your main residence, even though you no longer live in it (see Continuing main residence status after dwelling ceases to be your main residence)
- you moved into the dwelling as soon as practicable after its purchase (see Moving into a dwelling)
- you are changing main residences (see Moving from one main residence to another)
- you are yet to live in the dwelling but will do so as soon as practicable after it is constructed, repaired or renovated and you will continue to live in it for at least three months (see Constructing, renovating or repairing a dwelling on land you already own), or
- you sell vacant land after your main residence is accidentally destroyed (see Destruction of dwelling and sale of land).