All Topics / Legal & Accounting / Please help, RE: Capital gain and LOC

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  • Profile photo of A beginnerA beginner
    Participant
    @a-beginner
    Join Date: 2004
    Post Count: 1
    May 6, 2004 - 5:22 am

    Hello all, as my user name suggest, I am a beginner in the property investment. I have been in this forum for sometime and this is the first time I post a topic. I have two questions want to get some helps:

    1. I have hold an IP for about a year. It is duplex block and can retain the old house and build a new one at back. My question is that if I build a new one at back and sold the new one, does any one know how the capital gain was calculated? Besides, do I need to do an evaluation before start to build? and what will happened to the existing morgage after I subdivide the property? For the construction loan, do I need a deposit?
    2. For LOC, does the bank need to see my servicebility or they can give me the LVR of 80% regardless of my income?

    It will be very much appreciated if someone can give me some answers regarding the two questions. THANK YOU. I am a beginner and have lots to learn. This forum is great.[eh]

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    May 6, 2004 - 6:23 am

    I can answer 2.

    The bank will want to know your income to see if you can service the full limit of the LOC.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of melbearmelbear
    Member
    @melbear
    Join Date: 2003
    Post Count: 2,429
    May 15, 2004 - 2:39 am

    I think for No. 1 the land value is apportioned across the blocks, and if you sell the new house you will pay CGT on all of that.

    If you don’t want to pay CGT, move into the new house, and sell off the front house…

    Cheers
    Mel

    Profile photo of truebluetrueblue
    Member
    @trueblue
    Join Date: 2003
    Post Count: 142
    May 16, 2004 - 1:30 am

    Your question is more complicated than you think. When you subdivide an IP block, builds a house on the back & sells it to make a profit, those actions are likely to constitute the carrying on of an enterprise. Refer S9-20(1)(b)GST Act. As the sale of the house will exceed $50,000, you’ll be required to register for GST. The sale of the house will not be the sale of a capital asset.

    This is a very complicated area & you’ll need to check with your accountant.

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