Hi, I have had mixed answers about the following senario. We purchased a property in 1998. This was our PPOR till early 2007. We demolished our PPOR and subdivided the land into two lots. We refinanced and built a new house on one of the blocks and made it our PPOR again. This left us with one block spare,which we recently sold. I enquired about CGT, the ATO said that I must calcluate the buying price in 1998 ($125,000) remove the value of the old PPOR house (say $50,000). Based on 1998 prices this left us with the land worth $75,000. Subdivided- each block is worth $37,500. ATO say I must pay capital gains from $37,500 to the recent sale price which is $200,000. That is a hugh CGT bill for us. I just dont understand how they can back date investments like that? I would have thought it would be from the 2007 subdivision value till it was sold. Is there anything that can be done to avoid this? If that is the case, I feel sorry for people who bought in the 1970's and wish to subdivide now. Look forward to your response. Warren
I would have thought it the value of the land at the time of sub division. check out http://www.bantacs.com.au and get a few more opinions as the ATO is often wrong.
I think if you had purchased prior to about 1985 there is no CGT as it only applies for property purchased after its introductions
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Slight variation on the above CGT was introduced Sept 1987. However I recall that there is a provision that if substantial works are undertaken to a pre-cgt property eg knock down/rebuild or subdivision, then the property will become liable to cgt from that date.
Were there any costs associated with the subdivision? eg sewer, road access, provision of services?
Yeah, just the usual, stormwater, sewer, and subdivisons costs. but it only adds up to $15,000 or so. I have messaged BANTACs and aiting for a reply. Let you know. Thanks for your quick response.
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