GST & CGT

My wife and I own, among others, an investment property, which I’ll refer to as PR1. PRI is a small 3 x 1 house on 1008 m2 block. PR1 was in fact our PPOR until 3 years ago, we bought it 11 years ago and lived in it for 8 years. At the beginning of 2004 we started the process of sub-dividing the block to create 2 strata titles and then build a new house, which I’ll refer to as PR2. Since we owned the land there would be no land cost just construction costs, this was intended to give us another investment property at relatively low cost. However, after we started the project, I became concerned about the way our finances were set up. As one possible way to get things into better shape, I considered selling some or all of our properties. However, I’ve now learnt that if I sold PR2, (once it’s completed), the ATO will most likely consider me to be a developer and will require me to register for and pay GST on the sale, on top of which I’ll lose the CGT discount. I have a bunch of questions that come out of this, with another couple lurking in the back of my mind. Let me present the questions one at a time. First one:

1. If I decide to sell PR2 and accept the burden of GST + loss of CGT discount, and then continued to sell PR1 as well, would I also be liable to pay GST and lose the CGT discount on the sale of PR1?

I should tell you all, that I won’t be doing anything until I’ve sought advice from an accountant, but I would be interested in some opinions.

Paul.S