Hi guys,
Looking at a deal at the moment and waiting on a call back from the accountant, thought I’d see what the forum has to say on this.
Looking @ a property in Melb which is a 4 br house on 1500m2 of land, we’ve had our architect inspect the site and advise that we can get 4 blocks on land suitable for unit development from the site in addition to keeping the house. What I’m looking at doing is buying the house on a long settlement, getting the subdivision complete, sell the vacant blocks and roll the profits from the land sales into the house to minimise the mortgage. My only question on this is how to minimise the CGT payable on the land sales?
I’ve heard of strategies around this such as:
* Have the accountant roll the majority of the capital gains on the property into the front house which we’ll be keeping, this doesn’t stop us paying any CGT buy rather defers it unit we sell the front house (not anytime soon).
* Buy as a Trust to reduce the CGT payable (not sure on the ins and outs of this).
Has anyone undertaken one of these projects before, and if so, advise how they reduced the tax payable on the land component?
Thanks
Dave.
Hi Dave,
you definetly want to talk to your accountant about this one.
My understanding is, that as long as the land sale does not exceed the original buying price, no CGT is payable (as you mentioned, it is defered).
Buying as a trust is a good idea (again consult an accountant), but is not necessary for the CGT. You have to pay CGT on 100% of the profit unless you own it for 12+ month as an individual, partnership or trust. Then you only pay CGT on 50% of gain. A trust will help there further as you can distribute the income (eg between yourself and partner) and cap the tax at 30%. But be careful, the trust must be in place when you sign your contract.
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