We have purchased a large block of land with a small older house on it at the rear of the block. This will remain our PPOR for the immediate future. At some stage (3-7 years time when the kids are sick of climbing the trees etc) down the track we will subdivide the property. The land is 105 metres long and 15.25 metres wide. We will sell off the front parcel of land ( we probably couldn't afford to build a house on the block) and remain in the existing house at the back (battle axe) and renovate it. My questions are based on the following – we paid $480k for the property and at todays prices would be able to sell the sub divided land for about $300 – 350K as there are water views from the front of the property.
1 How is the front land valued (and when) for CGT purposes? Is the fact that our PPOR will be worth less on a smaller block taken into consideration?
2 "Someone" said we may not pay CGT if we don't subdivide for at least 3 years. Is that correct?
3 What is a reasonable amount to allow for the sub division costs? Moving sewer and stormwater for the PPOR house, long concrete driveway (70m) and fences, kerb and guttering etc I know it wouldn't be cheap!
4 As we are novices should we engage a town planner to take us thru the process? Likely cost?
5 After sub division costs and CGT (and any other costs I don't know about) is $150k profit achievable and realistic?I would really appreciate any advice
The best thing you can do is get some knowledge under your belt, I’m not sure what state of Australia you are in but we highly recommend contacting Troy of http://www.rookiedeveloper.com.au
Thanks RenoTeam,
I will get onto their website. I am on the Central Coast of NSW just north of Sydney. Sorry, I'm new at this
Saratogasquiz
Hi saratoga… welcome aboard
The way I see it this forum is probably the best place to “get some knowledge under your belt” – so please don’t apologize for asking questions.
In theory the cost base for CGT on the front block would be it’s current market value if it were already subdivided. I say “theory” because there’s always a range of what something’s really worth. The tax office will accept pretty much any logical approach to estimating the property’s worth at the time of purchase. In your case 2 or 3 market appraisals from real estate agents will probably suffice. The thing is.. you dont need to get these now, after you subdivide and you list the place for sale, you can ask the selling agent to give you a back dated appraisal. You basically want the highest value possible, the higher the cost, the lower your capital gain.
Re: question 2, the sale of the property will be subject to capital gains tax regardless of whether you subdivide today, or in 7 years time, and it’s treatment for capital gains tax would be the same. There’s no PPORE on that portion of your land because it will be sold seperately to your residence.
Questions 3 through 5 I’ll leave to someone more knowledgeable in such things
Thanks for your comments Mr501. The info helps
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