Hi all,
I need to obtain some CGT advice (I am willing to pay for it!!) however I can’t seem to get a straight answer out of my accountant.
Can anyone here recommend an accountant in WA who is savvy with property developments and CGT laws??
I’ll spell out the situation, someone here may have already gone thru a similar scenario.
I’m about to complete a duplex subdivision, where I’ve retained the existing front house and created a new lot at rear (with a new unit built on it). We are want to sell the existing front house once the rear development is completed and strata titles are thru.
** I’ve lived in the existing front house as my primary residence for 4 years and rented it for 4 years.
The two questions I have are :
1) As the new rear lot is a new parcel of land – do I have to hold it for 12 months to obtain the 50% CGT discount.
2) How the CGT will be calculated on the existing house.
Does anyone have an idea?
Cheers – NJ
From my understanding of CG tax which could be wrong,
2) You only pay CG tax on any increase in price since you’ve started renting it 4 years ago
1) You’ve already owned the land for more then 12 months, only it wasn’t subdivided.
To work out the tax due you’d need the value of the property 4 years ago plus development costs taken out of the combined current value of both front and rear properties and then apply the 50%discount. I’d confirm this with the tax office to make sure this is the case and also get written valuations on both properties.Cheers,
Harrygo straight to the source
I recommend that you phone up the tax department and ask them for some help as they are quite helpful check out
http://www.ato.gov.auI spoke the the ATO on two occasions and received TWO different answers!!!. Not very helpful : (
I had another read through the ATO CGT guide and based on the examples within, this is the way I think it SHOULD work out for me.
1) I should receive a part “main residence exemption” on CGT for the existing front house and front land. This part exemption will be based upon 6 years of living as my primary residence and 2 years of renting it out. This will be expressed by a ratio (calcuation is on the ATO site)
2) I should also recieve the 50% CGT discount on any CGT amount remaing (after the above exemption has been applied) as I have owned the property for more that 12 months.
3) I will NOT recieve any CGT exemption for the rear lot and new house UNLESS I hold for a further 12 months after the new title is issued.
4) Cost based of each lot will be based on a 50% split of the original cost of the entire block + land development costs per lot + construction/improvement costs per each dwelling.
Comments anyone?
Cheers – NJ
From what i understand the land that you are subdiving has value from when you first purchased it, for example, just say you bought the original house for $200,000 and you are on 1000 square meters. Then you decide to subdivide it, you may argue that the back new block is worth $100,000 so that would come off when working out your capital gains tax. i would not asume that the new block has no value. ( hope this makes sense) And as for the 50% exemption from what i also understand this is the case, as it is not about the new title, you have owned the rear parcel of land for more than 12 months, the fact that you have just ” changed its purpose” should not mean you have to pay CGT on 100% of the gain…. However i would check this with your accountant this is not advice just i have been through this many times subdividing.
Hope this helps
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