Does anyone know how tax & capital gains works when you develp a block but keep one? ie;
We bought a knock down over 12 months ago (so qualify for the 50% discount) but now plan on building a duplex on the site. After we build we are planning on definitely selling one immediately and are thinking of living in the other. If we do this, how does capital gains tax work? As we wouldn't be profitable until we sell the one we live in do we not pay any or do we pay based on the perceived value of both after we sell one?
Thanks in advance
I'm interested in this too, any help would be appreciated.
You would proportion the cost base based on land size I think.
eg. you would need to value the land when split – value each portion and this would be the cost base for the land when you were to sell.
Also, be aware that CGT may not apply if you are constructing to sell. It could be just income tax. This may also differ between the blocks.
It is a complicated area so seek advice.
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
Yes I will seek professinal advise thanks
However before I do, would you know from what time period you are classified as owner for 12 months purpose (50% CGT); i.e. settlement is likely to be for example October 2012, building is likely to take for example 9 months on 5 units. Do you suggest to be able to gain the 50% CGT benefit to hold onto property for say 3 months and only incurr borrowing costs at residential rates on land value and then start building 3 months later to have it completed and hopefully sold just in time for expiry of 12 months ownership?
hope that makes some sense.
If you are developing then CGT will generally not apply and therefore no 50% discount.
But if it did apply the time period is calculated from the dates of contracts.
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
Really, this is new to me. I can see the logic that CGT will not apply if you buy land and develop, however what if you buy land with a house on it and then subdivide, build and sell.
Will CGT apply under this scenario? Obviously it is more beneficial if CGT did apply.
It all depends….You could probably get around it. But you should seek advice before signing contracts.
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
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