Hello,
I am thinking about subdividing my property(PPOR), selling the original house/block, and building on the newly created block and also sell that.I realise that as my PPOR the original house doesn’t attract CGT, but will the new block?, and if it does, could I avoid CGT by living there for a while?.Or would the ATO see this as tax aviodance?
If I was to subdivide and sell off the new block of land without building on it, when calculating CGT, does the ATO take into account the loss in value of the original block and offset that against the gain?
I Know I need to go and talk to a property accountant about this but any feedback would be appreciated.
GavinWhere adjacent land is disposed of and the event covering that disposal is not the same event covering the disposal of the dwelling, then the main residence exemption cannot relieve the gain arising on the sale of the adjacent land under Section 118-165 of the ITAA 1997. This is no different to the pre-existing Section 160ZZQ(4) ITAA 1936 which precluded the main residence relief where adjacent land was disposed of separately.
Taxation Determination TD 1999/73 makes it clear that, in the Commissioner’s view, land under a unit of accomodation which is subject to the main residence exemption does not qualify for the main residence exemption if it is sold separately from the unit of accomodation.
Yes there are strategies for minimising CGT on the sale of both properties (provided you do build on the new block and move into it ). Discuss with your accountant.
GST is a complex issue and something you need to address with your accountant. In particular refer to Miscellaneous Tax Ruling MT 2000/1.
Thanks for the reply Mike.
It makes sense that if I was to subdivide my property and sell of the newly created block that it would be subject to CGT, as the new block is no longer my PPOR.However if I subdivide and only sell the property that I currently reside in(which isn’t subject to CGT), build on the new block, then live in it. Then when I go to sell that, surely it isnt subject to CGT or GST.
The question is, how long do I have to live in the new property for?. Is there a minimum set by the ATO. Or do you just have to prove that it was your PPOR if even for only say 1 month or less?.
Any thoughts?
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