Is your adjacent land or separate structure exempt from CGT? Ed Chan

GUEST OBSERVER 

If you are selling your home, you can claim the main residence tax exemption for the property you live in, including the land adjacent to it and other structures associated with the property like a separate garage or laundry.

The main residence exemption includes compulsory acquisition of the main residence.

A residence or dwelling is a property used mainly for residential accommodation, including a cottage or home, a flat or apartment, a strata title unit, a unit located in a retirement village and a house boar, caravan or mobile home.

The land covered by the main residence exemption is close to, near, adjoining or neighboring the dwelling.

To be tax exempt, the land and dwelling should be sold together and the owner should have used the land mainly for private and domestic purposes with the dwelling. The total area should also not be more than two hectares. If it is more than two hectares, the owner can choose which two hectares will be exempt and the remainder will subject to CGT.

A home unit or flat usually comes with areas that are separate physically from the unit, such as a store room, laundry or garage.

If these areas were used primarily for private and domestic purposes associated with the unit, they will be exempt from CGT as well. However, if these structures are disposed separately from the unit or flat, the capital gain or loss will not be exempt from capital gains tax.

Ed Chan is founder and non executive chairman, Chan & Naylor Accountants and can be contacted here.