Using the building concession for major renovations

There is no better way to exploit the CGT main residence provisions to increase the value of your home than by using the “building concession” to renovate your home.

At the far end, this concession allows you to move out of your home, knock it down and rebuild a more valuable one without losing any of your CGT main residence exemption. 

However, it does require a number of conditions to be met. 

Conditions to be met

Firstly, from the time you move out (or start renovation) you have four years to complete the construction. 

Moreover, if you can’t complete the construction because of circumstances outside your control or other such serious matters within this four-year period, the Commissioner has the discretion to extend this period as appropriate. This may be invaluable at a time of building supply shortages – or just a shortage of builders.

Secondly, you must reoccupy the renovated home or the newly constructed one as your home as soon as it is practicable after the construction has been completed. This is usually measured by when the building completion /occupation certificate (or the like) is signed-off.  This rule would also presumably take into account any personal circumstances (such as illness, etc) to determine when it is “soon as practicable” to move in. 

Thirdly (and here’s the real concessional part of the concession to exploit) – you only have to re-occupy and live in it as your home for three months at a minimum. 

However, re-occupation must be on a bona-fide basis – and note that there have been instances where the taxman has followed this up by looking at, for example, gas and electricity usage and comparing it to average usage in the area. And these days this can be readily done by a computer data match.

Nevertheless, only three months’ occupation as your main residence is an extraordinarily generous part of the concession.

But apart from moving out and renovating your home, there are a range of other circumstances in which the building concession can be used – but again noting the above conditions must be met in each case. 

And these circumstances range from merely buying a vacant block of land on which to build your home, to the case of doing a knock-down re-build in respect of your existing home. 

The concession can also apply where someone who buys land and/or enters into a contract to build a new home dies before completion of the new home and/or before its occupation. In this case the concession extends to the executor of that person’s estate. 

So if you are thinking of doing some renovating or a knock-down rebuild, it is important to come and see us about proper planning to use this concession most effectively.