CGT main residence exemption eligibility checklist
The main residence exemption is one of the most valuable concessions in Australian tax law — and one of the easiest to get wrong. This checklist is for tax advisers and property lawyers assessing eligibility at the time of sale.
This is a 12-step checklist for assessing whether a dwelling qualifies for the CGT main residence exemption under Subdivision 118-B of the Income Tax Assessment Act 1997. It covers ownership, establishment, 2-hectare cap, absence rule, and foreign resident carve-outs.
The checklist
Confirm the taxpayer is an individual
The exemption applies only to individuals — companies and trusts are excluded. Check entity status and title holding.
Confirm the property is a dwelling
Check the property meets the dwelling definition — a unit of accommodation that is a building or can be occupied as a residence.
Assess when it became the main residence
Identify the date the dwelling first became the main residence — the full exemption runs from that date.
Apply the 2-hectare adjacent land rule
The exemption covers up to 2 hectares of adjacent land used for private or domestic purposes. Apportion any excess.
Check the absence rule election
If the taxpayer was absent, consider the 6-year absence rule (rented) or unlimited (not rented) under section 118-145.
Check income-producing use apportionment
If part of the home was used to produce income (home office, rental), apportion the gain under section 118-190.
Apply the deceased estate rules
For inherited dwellings, check the 2-year rule from date of death in section 118-195 and any Commissioner discretion.
Check foreign resident denial rules
Since 30 June 2020, foreign residents at the time of CGT event A1 cannot claim the exemption, subject to transitional rules.
Consider the building-on-land extension
Where a dwelling is built on the land, the exemption can extend back up to 4 years under section 118-150.
Check spousal and dependent child rules
Spouses can only have one main residence between them (with a limited overlap rule). Dependent children rules also apply.
Calculate the partial exemption where needed
Where the exemption is partial, apply the formula in section 118-185 — days as main residence over total ownership days.
Document the position and evidence
Keep evidence of occupation — utilities, electoral roll, driver licence, and mail — to support any ATO review.
When this checklist applies
Use when a client is selling a dwelling, considering renting out a home, or doing an estate plan with a main residence.
Common pitfalls
- Assuming full exemption when the home was rented out for more than 6 years
- Missing income-producing apportionment for home offices or Airbnb
- Overlooking the foreign resident denial rule for expats
- Not applying the spousal one-home-only rule on separation
- Missing the 2-year deceased estate window
Run this checklist on a real matter
Quillio assesses main residence exemption eligibility on a live matter, runs the apportionment calculation, and drafts the supporting memo. See /practice-areas/property-lawyers or start a free trial.
General guidance only — this is not tax advice. Specific advice from a registered tax agent is required before relying on any exemption.
Use this checklist on your matter.
Quillio can run this checklist on a specific NSW conveyancing matter — confirm each item, calculate adjustments, and generate the supporting documents. The free trial requires no credit card.
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