Which part of your land is exempt
When selling your home you can claim the main residence exemption from capital gains tax (CGT) for up to 2 hectares of the land your home is on.
If your land is used for private purposes and is greater than 2 hectares, you can choose which 2 hectares are exempt. The rest is subject to CGT.
If any part of the land is used to produce income it is not exempt. This is the case even if the total land area is less than 2 hectares.
The 2 hectares you choose must include the land that is under your dwelling.
Example: land used for private purposes
Mohammed bought a house with 15 hectares of land. He used 10 hectares for apple farming and 5 hectares for private purposes. Mohammed can get the main residence exemption for:
- the house
- 2 hectares of land he selects out of the 5 hectares that he uses for private purposes (the land he selects must include the land under the house).
After 9 years, Mohammed decided to sell. He had his house valued. The valuation stated that the house and the 2 hectares of land he had selected were worth two-thirds of the total value of the property.
Mohammed can claim the main residence exemption for two-thirds of the capital gain on the sale of the property.
End of exampleSelling land separately from dwelling
If you sell land separately from your dwelling it is subject to CGT unless either:
- your dwelling has been accidentally destroyed and you sell the vacant land
- vacant land adjacent to your dwelling is compulsorily acquired.
If the dwelling is not sold with the land – for example, because the dwelling is a caravan and has been removed or sold separately – the sale of the land is subject to CGT.