Hi All,
I've got a PPOR that i've had for over 12 months. I've just had my final survey plan signed by Council and now have a separate block of land out the back.
My question is, do I need to pay the full amount of tax on the block of land if I sell it, or am I considered as a 50% CGT exempt candidate considering i've owned the land for over 12 months ??
If I can't sell the land shortly, I'll be building on the block and my understanding is that this will attract the full tax rate – can anyone please confirm this ??
Additionally, this block was initially purchased under my own name and has been sub-divided in my name.
Thanks in Advance.
Cheers,
Darren
Once it has its own title it is no longer exempt from tax, I think the value at the point of sub-division is the new cost base. If you sell it for more than the cost base then you will be up for tax.
have a look at the pdf booklets at bantacs.com.au one called how not to be a property developer.
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
Its a complex issue.
Firstly, the sale of the new block will indeed be a capital gain tax event. Secondly, regardless of whether you build, or sell vacant, you will be entitled to the 50% CGT discount, as you have owned that land for more than 12 months.
The cost base of the land, will actually be the appropriate portion of the ORIGINAL purchase value. You need to get a valuation, with regards to how much the new block is worth, as a portion of the entire property, and apply that fraction to the original purchase price. So your final cost base for CGT will include: portion of original purchase price (& stamp), portion of subdivision costs, finance/interest costs, rates etcetera, and construction costs.
Furthermore, if you intend to construct a dwelling and sell it within 5 years of construction, you need to register for GST. Claim the GST on your expenses during construction, and you will have to pay GST out of the sale value.
Further reading:
subdivision of PPOR and cost base:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36907.htmnew residential properties & GST:
http://www.ato.gov.au/businesses/content.asp?doc=/content/00197808.htmHope This Helps…
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