The main residence exemption can apply to disregard all or part of a capital gain or a capital loss when an individual taxpayer disposes of a dwelling (or ownership interest in a dwelling) that was their main residence.
Lance bought a house situated on a one-hectare block of land on 26 March 2000 and moved in immediately. Lance lived in the house until 8 December 2011 when he sold the property. The capital gain is fully exempt from tax under the main residence exemption.
A partial exemption to capital gains tax applies where a dwelling was the taxpayer’s main residence for only part of the period they owned the dwelling and/or it was used to produce income for all or part of the ownership period.
Arthur settled on the purchase of a house on 11 June 1992. The house was rented out to tenants immediately after purchase until 14 July 1995. Arthur moved into the house on 15 July 1995 and lived there until it was sold on 28 July 2011 under a contract that was signed on 26 May 2011.
The capital gain will only attract a partial main residence exemption, as the house was Arthur’s main residence for only part of his total ownership period.