Im hoping this is a pretty easy one, I have owned and lived in a house in Victoria for the last 4 years as my PPOR, it has development potential and I am currently getting plans and permits for 4 Townhouses for the section, if I sell with just plans and permits, will I be subject to any Capital gains tax?, and if I was, would I be better off having the plans and permits, "All-but" complete before on selling the section to perhaps a builder/developer to avoid CGT?.., and leave them to do the final minor changes required to get the permit.
If you or your partner have not claimed any other property as a PPOR during the time of your ownership and you moved in to it as soon as possible after settlement and have not derived income from it then you can sell exempt from CGT as long as you are selling the whole property in one contract. The status of your DA is irrelevant to the CGT exemption.
If you are subdividing part off to sell then there is an added layer of complexity.
thematrix,
Agree with crj.
If you subdivide part off to sell, you may find this helpful:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36907.htmCheers,
KennyThanks for the info guys, 1 small thing I did leave out, I am presently renting out a couple of rooms in my house starting just this year, and thus of course have not put in a tax return, Im guessing I still should be exempt from CGT based on the 6 yr rule, as it is, and has only been the only property I have ever owned.
thematrix,
The 6 year rule is also known as the Absence Rule under ITAA s118-145.
If an individual is absent from their main residence they can still treat it as their main residence where:
1, it is used for an income producing purpose – up to 6 years; and
2, it is not used for that purpose – indefinitely.If you are not absent from the property you may not be entitled to the exemption. So if you rent out part of your home, the 6 year rule may not apply. Instead your CGT exemption is likely to limited to the part of the PPOR you use privately. If this is the first time you have earned income from your PPOR it will cause your cost base to be reset at the market value at the date it first started earning income (A couple of Real Estate Agent documented valuations will probably be sufficient). This can be the case even if you are just renting out a room in your home.
Hope that helps
KennyAnd this is where it becomes complicated.
If you are renting out some rooms and still living there then, as Kenny says, you may lose your CGT exempt status. If that is the case, your PPOR will be exempt only up until the time that you started renting it out – earlier this year. You will have to pay CGT on any increase in value since the time you started renting out rooms.
If you get a DA on your property, then obviously that will increase the value of your property. But as the increase has occurred since you have lost your CGT exempt status, then you will be required to pay CGT on that increase in value. The ATO will look at the value of your house immediately prior to when you started renting rooms. If you don't have evidence of an independent valuation, then the ATO may well look at the council valuation, which, as we all know, is often far less than market value. The ATO will then assess your increase in value as the difference between council value at the time you rented out the rooms and your final sale price.
You really need to get some accounting advice on this because my comments are based on your losing your CGT status, which you may or may not lose.
Cheers
K
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