There is a concession in the CGT rules that can allow a taxpayer to treat a property as their “main residence” even though it does not yet have a habitable dwelling.

It is a widely recognised fact that an exemption to capital gains tax (CGT) applies to a taxpayer’s principal or main residential property. What is less well known is that the period when this main residence CGT exemption applies can be extended to cover the time it takes to finish construction (or complete repairs to) of the physical residence on the property.

So even if there is no actual dwelling on a block, the vacant land can start to be treated as a taxpayer’s “main residence”. This is commonly referred to as the “building concession” or sometimes the “four year rule” for reasons that are outlined below.

What is the building concession?
The “building concession” allows a taxpayer to choose to treat a property they have acquired as their main residence during the period that they “construct, repair, renovate or finish building” a dwelling on that property. The land at the time of acquisition may or may not contain an existing dwelling on it, or if there is a dwelling, the taxpayer has vacated it in order to affect repairs.

Note that vacant land may also be treated as a taxpayer’s “main residence” if the land is vacant because a previous dwelling has been destroyed (see more on this below). Readmore