I was reading an article in the AFR from a few weeks ago. It stated that if you subdivide a property that is your PPOR and sell off a subdivision, you will pay CGT on that sale if that subdivision doesn’t include your PPOR. Can anyone confirm if that is correct?
My wife and I bought a property 4 years ago that is zoned R60 and is our PPOR. We want to develop the back of the property into two townhouses and keep the existing residence at the front as our PPOR.
1. If we sell the subdivisions either before or after development, will we pay CGT.
2. Does the process of subdividing in itself trigger a CGT event, even if titles to the subdivision remain in our names (we are joint tenants of the existing property).
3. Would having title to one of the subdivisions in my name only require CGT to be paid, as we are currently joint tenants?If CGT is to be paid, how do you calculate the cost base of the part being sold. For instance we put up a garage in what will be one of the subdivisions which will be demolished in order to develop that block. Is the cost of that garage part of the cost base of that subdivision?
see the pdf booklets at http://www.bantacs.com.au for some good info
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
Thanks. Looks like another source of good information.
ladybird wrote:I was reading an article in the AFR from a few weeks ago. It stated that if you subdivide a property that is your PPOR and sell off a subdivision, you will pay CGT on that sale if that subdivision doesn't include your PPOR. Can anyone confirm if that is correct? My wife and I bought a property 4 years ago that is zoned R60 and is our PPOR. We want to develop the back of the property into two townhouses and keep the existing residence at the front as our PPOR. 1. If we sell the subdivisions either before or after development, will we pay CGT.Before development, Yes unless your PPOR is included in the contract After development Yes unless you are classed as a developer, bear in mind GST as well if you are a developer 2. Does the process of subdividing in itself trigger a CGT event, even if titles to the subdivision remain in our names (we are joint tenants of the existing property). No
3. Would having title to one of the subdivisions in my name only require CGT to be paid, as we are currently joint tenants?Yes If CGT is to be paid, how do you calculate the cost base of the part being sold. For instance we put up a garage in what will be one of the subdivisions which will be demolished in order to develop that block. Is the cost of that garage part of the cost base of that subdivision?Thanks crj. Your post and terryw’s link have been invaluable.
I think I understand now whether CGT will be payable or not. Calculating the cost base may be the tricky bit, as presumably all costs with owning the property (land tax etc) need to be apportioned to the various subdivisions. Since we didn’t intend to subdivide when we bought, but just make it our home, we obviously haven’t kept any records of such expenditure.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
