Purchasing another residence 108-04070020

Example

Description

1

Attempts to obtain a new principal home not within a reasonable period

An extended exemption does not apply if the customer has not made reasonable steps to obtain a new principal home within a reasonable period (i.e.12 months) of the sale of the old principal home (for sales on or after 01/01/2023).

Example: Sam and Jenny sold their principal home on 20 June 2023. They went overseas and came back to Australia on 30 October 2024. They entered a contract of sale to purchase a new home on 15 December 2024 and settlement occurred on 15 March 2025. In this case, although Sam and Jenny made reasonable attempts (that is, they entered into a contract of sale to purchase a new home within 24 months) they did not make those attempts within a reasonable period (that is, within 12 months) from the date of sale. In this case, Sam and Jenny cannot gain an extended exemption for principal home sale proceeds.

2

Delays out of customers control to obtain a new principal home within initial 24 months of sale (for sales on or after 01/01/2023)

Examples include but are not limited to:

• Delays in obtaining building approval from local shire council. This has in turn delayed entering an agreement with a builder
• Caring for a close family member in a separate location to the place the customer is to build their new principal home
• Customer is hospitalised for an extended period
• Demands on the building industry are stretched in a particular area, for example due to a natural disaster like a flood or cyclone damage to area

Example: The Smiths sold their principal home in October 2021. They purchased a block of land in January 2023 and, due to delays with developers, were unable to commence building on the land until June 2023. The Smiths signed a contract in June 2023 for completion of the building by January 2024. The builder also experienced delays and the new home was only partially complete by January 2024. The builder estimates completion of the home by March 2024. In this case, the Smiths are eligible for the extended exemption for the period from October 2025 to the end of March 2024 as they:

• made reasonable attempts (that is, buying a block of land and signing a contract to build a home within 24 months)
• made those attempts within a reasonable period (buying a block of land within 12 months), and
• experienced delays beyond their control (developer and builder delays)

Evidence

Documentary evidence is required to support the extended exemption, for example, correspondence from the local shire council or builder.

3

Assessment of land already owned by the customer to be used to build a new home – on or after 1 January 2023

The maximum total asset value that may be exempt is the value of the proceeds of the sale of the old principal home.

Example 1: Sally purchased a block of land for $100,000 before selling the principal home. Sally sold the principal home and received $350,000 on 30 July 2023. Sally used some of the proceeds to pay off the mortgage on the block of land. The balance of the settlement money went into a bank account. Sally intends to use this to build a new principal home on the block of land. In this case, the block of land and the money in the bank account can be exempt from 30 July 2023. The amount of the proceeds from the sale of the previous home that are intended to be used for the new build are exempt from the assets test for up to 24 months and deemed at the lower deeming rate.

Note: the exempt value of the land and the money in the bank account is the lesser of the amount received for the old house and the amount they will spend on the new one including the land.

Example 2: John has a block of land worth $200,000 with a $100,000 mortgage. John sells the principal home for $300,000 and intends to build on the block of land. John uses $100,000 from the sale proceeds to pay off the mortgage on the land and intends to use the balance of the funds ($200,000) to build a new principal home.

The value of equity in the land and money from the proceeds of the sale is $400,000; this is $100,000 more than the amount received from the sale. An exemption applies only to $300,000 (the amount the principal home sold for). The exemption would apply to the amount paid to pay off the land ($100,000) and the balance of funds from the sale ($200,000). The $100,000 equity previously owned for the land is still an assessable asset as the exemption amount cannot be more than the proceeds from the sale of the old principal home.

Example 3: Henry purchased a block of land for $150,000 before selling the home. Henry sells the principal home for $400,000 and intends to use the entire sale proceeds to build on the land. As Henry already owned the block of land, which was already assessed under the assets test before selling the principal home, the land remains assessable until the build of the new principal home has been completed. Once the new home is complete and any sale proceeds exemption ends, the land can now be considered the principal home.

Note: the customer must uniquely identify the location of any real estate or business site they own or have an interest in.