how to calculate capital gains on subdivision and unit trust query

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Homemade
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@homemade
Join Date: 2013
Post Count: 22
February 7, 2013 - 2:39 am
Hi – there is possibly a post on this already, but the ones i could find did answer fully.
I want to buy an IP on 1200m2 corner block. I want to split the rear 600m2 block off and sell it after subdivision. I hope to do this in a 12 month timeframe from purchase. How is capital gains calculated on the sale of that land?
Also – what is best structure for ownership. I am in top tax bracket whilst wife is only in middle. I understand a unit trust can distribute profits as it pleases which may help the CGT issue? The deterrent here as i understand it is that it cant apportion losses? The property will be negatively geared for the twelve months until land is sold but then should be very positive. I would hate to miss out on the negative gearing but possibly shouldn't be so greedy and hold out for CGT savings?
Any help appreciated.
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
February 7, 2013 - 3:19 am
CGT may not apply as your intention is to sell at a profit.
Unit trusts can only distribute income in accordance with the deed which will be a fixed percentage based on unit holdings. Maybe look into discretionary trusts.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Homemade
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@homemade
Join Date: 2013
Post Count: 22
February 8, 2013 - 9:34 pm
How about if I sold the existing house then build a unit at rear to hold?. . The numbers work better with this arrangement. Is there a ccgt consequence for this approach assuming that I sell the front house at a similar or slightly less price then the entire block purchase price?
RPI
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@rpi
Join Date: 2012
Post Count: 308
February 9, 2013 - 10:47 am
Possibly. Depends on how it is structured, but it is called apportionment.
As Terry said, your intention is to sell it, It will be trading stock and you will pay tax on it at your income (or entity) rates. You are not entitled to a 50% CGT on trading stock. Make sure your structure allows the income to be taxed favourably. IF you are in NSW see Terry W, he will save you money.
D
RPI | Certus Legal Group / PRO Town Planners
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