I got a land and house which has always been my PPOR. I am now planning to demolish and subdivide it into smaller units. I will then keep one unit which will be my PPOR. Couple things that I’d like to clarify:
1. I’ve been told that the CGT exemption will apply up to the point when it’s being demolished. So profit of 300K is tax free from the market valuation of 700K minus the original purchase price of 400K
2. Then the market valuation above (which will be done through real estate agent) will determine the cost base of each unit and the profit will be considered as revenue instead of CGT – So it will be subject to GST, income tax, etc.
Hopefully, my understanding is correct that the cost base (for the land) of new unit won’t be based on the original purchase price.
Please advise if I miss any calculation or other consideration.
Thanks in advance.
Irwin
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This topic was modified 9 years, 10 months ago by
Irwin. Reason: typo
Once you demolished that PPOR you lost the CGT benefit and CGT will apply because ATO see this as business. 10% GST will also apply. DA can take lots of money and time if development is not straightforward. You need to add 10% money for unexpected issues. If your are not developer and doing it as daily business than you may not see much money in development. I would prefer to apply for DA of Subdivision and sale it as development site. That’s how you will get quick money with CGT and GST. When you consider all associated cost. you will realised that nothing much left for you.
Assuming the PPOR was owned by one spouse, could they sell to the other partner at Fair Value (stamp duty expection may apply e.g. in Victoria can do this for love and affection). Locks in the tax free capital gain and establishes cost base going forward.
The transfer might help with getting finance which would be a good reason for doing so.
In the original scenario one of the units will become the PPOR. Is the interest deductible on the whole or only part of the development during the development process?
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This topic was modified 9 years, 10 months ago by
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