Main Residency to completey avoid CGT?

Hi All,

I have made a few recent posts on this forum as I am just about to start the exciting venture of building a townhouse at the rear of my property (planning permit approved). My brother and I both own the property and the development will be a joint venture so everything is 50/50.

Our plan is to develop the rear property and sell for profit and then with the money earnt I will buy my brother out of the front property. My brother walks away with a profit and I walk away with a home in an area I love. In theory it sounds great but i am very fearful of the CGT eating up all our profit.

Which brings me to my question, i have read that you are exempt from paying CGT if you can prove the property is your main residency for 12 months. So my thought was my brother and I would move into the rear property once completed and then sell after 12 months. During that time we would satisfy all the criteria that the ATO refer to as making it your main residency and whilst we live in that residency we would rent out the front property.

Once the year passes we would then sell the property to avoid the CGT and then I would move back into the front property and make the purchase from my brother.

If that is all possible then I guess some additional questions would be:

When could you technically claim a developing property as your main residency? For example could i begin from lock-up stage? I would not be living in the property as construction would still be going on for a few months but for the purpose of the 12 month exemption it would only then require me to actually live in the property for say 9 months.

Also once I move back into the front property does the 12 month main residence exemption clock re-set? The reason i ask this is because my brother lived in this property for 15 months but recently moved out. After he lives in the rear property for the 12 months then he will probably want to sell me the front property immediately so would he then have to pay CGT on that? OR because he previously lived in it for over 12 months would he be exempt?

Sorry if I am all over the place with this but just trying to clarify the details.

I also understand that we need to weigh up the cost of the CGT on an immediate sale after build versus the increased loan of say 175k each which we require for the build.