Hi All,
From the headline it seems a bit tricky. I have received some property tax advice and want to double check it or find better!
Situation details as follows
* I bought my first home in 1999.
* I lived their for ~18mths
* I rented the house out for ~18mths
* I moved back in and have lived there since
* I have bought 2 IP's.During the period of ownership, zoning changes have been made. Allowing for re-development.
* My house is very old & unrenovated.
* I'm now married and have a young family.
* I wish to build a new home for my family.
* I wish to maximise the value of my property. Hence a subdivision.
* Building is quite expensive as we know.
I don't feel comfortable with a large personal mortgage and want to sell off 1 half of the block. With or without a house on it.I've been told by the ppty tax accountant that
* if i subdivide the newly created subdivided vacant block i will pay $45k in CGT
* build a house on that newly created subdivided vacant block i will pay GST & CGT totalling $110kI asked if it was possible to rent the property out again to reset the cost base to today's value. But was told.
* There is no possibilityy of “resetting” the cost base as the 6 year rule prevents the “Home first used to produce income” rule being invoked. Basically if you rent the property out it is still classified as your main residence under the 6 year rule and therefore the cost base remains your purchase price.What is the best way to move forward on this?
Regards and thanks
Phil
You'd be best advised to check your numbers Phil, paying cgt is part & parcel of the development and gst is payable as you have 'created' a new lot. Remember that you may also get some input credits for gst and you could also investigate building the new house & a quick reno on the old one to sell it off, possibly keeping the cgt exemption on the old house until you move into the new one? Then the remaining (new) property will be your PPOR.
Scott No Mates wrote:You'd be best advised to check your numbers Phil, paying cgt is part & parcel of the development and gst is payable as you have 'created' a new lot. Remember that you may also get some input credits for gst and you could also investigate building the new house & a quick reno on the old one to sell it off, possibly keeping the cgt exemption on the old house until you move into the new one? Then the remaining (new) property will be your PPOR.Thanks for your reply Scott. The current house straddles what would be the new boundary. It is also too wide to allow a house next to it (ie both facing the street).
As for the numbers, yeah, i came up with a set of my own and then the property tax accountant did the same. Our numbers were similar. But, she had never come across this scenario before. Which is why i'm asking on here!
If your tax accountant has not heard of this before, then you may be better getting a better tax accountant who is an expert in property. Also make sure you are using the margin scheme for the GST calculation.
Cheers,
LukeIs it possible to reset the cost base by moving out and renting the dwelling during the DA process? I hope to be lodging in a matter of weeks.
ie When I asked if it was possible to rent the property out again to reset the cost base to today's value. But was told.
* There is no possibilityy of “resetting” the cost base as the 6 year rule prevents the “Home first used to produce income” rule being invoked. Basically if you rent the property out it is still classified as your main residence under the 6 year rule and therefore the cost base remains your purchase price.Why can't i elect to say that it was my PPoR until now. Get it valued to reset the cost base and then rent out until the DA is approved?
Phillyc wrote:Hi All,From the headline it seems a bit tricky. I have received some property tax advice and want to double check it or find better!
Situation details as follows
* I bought my first home in 1999.
* I lived their for ~18mths
* I rented the house out for ~18mths
* I moved back in and have lived there since
* I have bought 2 IP's.During the period of ownership, zoning changes have been made. Allowing for re-development.
* My house is very old & unrenovated.
* I'm now married and have a young family.
* I wish to build a new home for my family.
* I wish to maximise the value of my property. Hence a subdivision.
* Building is quite expensive as we know.
I don't feel comfortable with a large personal mortgage and want to sell off 1 half of the block. With or without a house on it.I've been told by the ppty tax accountant that
* if i subdivide the newly created subdivided vacant block i will pay $45k in CGT
* build a house on that newly created subdivided vacant block i will pay GST & CGT totalling $110kI asked if it was possible to rent the property out again to reset the cost base to today's value. But was told.
* There is no possibilityy of “resetting” the cost base as the 6 year rule prevents the “Home first used to produce income” rule being invoked. Basically if you rent the property out it is still classified as your main residence under the 6 year rule and therefore the cost base remains your purchase price.What is the best way to move forward on this?
Regards and thanks
Phil
I suggest you get a 2nd advice of a tax accountant who specialize in GCT as this can save you THOUSAND!!
Yes GCT is payable for your situation, because you fall outside the 6 years rule. But i think your numbers are not quite right.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Phillyc wrote:Is it possible to reset the cost base by moving out and renting the dwelling during the DA process? I hope to be lodging in a matter of weeks.
ie When I asked if it was possible to rent the property out again to reset the cost base to today's value. But was told.
* There is no possibilityy of “resetting” the cost base as the 6 year rule prevents the “Home first used to produce income” rule being invoked. Basically if you rent the property out it is still classified as your main residence under the 6 year rule and therefore the cost base remains your purchase price.Why can't i elect to say that it was my PPoR until now. Get it valued to reset the cost base and then rent out until the DA is approved?
You can;t reset a 6 years rule!
since you bought it in 1999, it;s to late- you will still pay GCT for the part it was a IP.Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
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