It is generally understood that a capital gain or loss an individual makes from a CGT event that happens in relation to a dwelling is disregarded if the dwelling was the individual’s main residence throughout their entire ownership period.

What is not so well understood is that the main residence exemption can extend to garages, storerooms or other structures associated with a flat or home unit, to the extent they are used primarily for private or domestic purposes in association with the flat or home unit.

However, the exemption only applies if the ‘adjacent structure’ (including the land underneath it), is sold together with the flat or home unit.

In addition, the ATO takes the view that a dwelling can include other units of accommodation that are used together with the dwelling as one place of residence (eg, a bungalow or granny flat). Therefore, if they are sold together, the main residence exemption can potentially apply to all the units of accommodation.

Whether two or more units of accommodation are used together as one residence is a question of fact.

However, if there is an adjacent structure or unit of accommodation which is considered a separate dwelling, then, if they have lived in both, the taxpayer must choose which one is their main residence (and if they have no lived in one of them, that dwelling cannot be their main residence).