Subdividing and CGT

Hi,

I have been reading through the documentation on the ATO website and I am a little confused as to whether I will be able to do what I want to do and be exempt from CGT.

I have a block of land (under 2ha) with a house on it that we have been living in for the last 18 months. What I would like to do is subdivide the block, then build a duplex on the blocks, sell one side and move into the other side as our new main residence.

From the tax site I have found the following paragraphs that seem to imply that it is possible to do what I want without incurring CGT.

First in the case of subdividing the block:
“Subdividing land does not result in a CGT event if you retain ownership of the subdivided blocks. Therefore, you do not make a capital gain or a capital loss at the time of the subdivision.”

We would then demolish the existing house, build a duplex, leave one side empty and live in the other side for three months as per the following conditions:
“If a newly constructed dwelling is built to replace a previous dwelling that was demolished or destroyed, you can get a full exemption when you dispose of the property if:

• the original dwelling was your main residence for the full period you owned it, you did not use it to produce assessable income and it was on land covering an area of 2 hectares or less
• the new dwelling becomes your main residence as soon as practicable after it is completed, it continues to be your main residence until you dispose of it and that period is at least three months
• you make a choice to treat the vacant land and new dwelling as your main residence in the period starting when you stopped occupying the previous dwelling and ending when the new dwelling becomes your main residence, and this period is four years or less, and
• you dispose of the land and new dwelling together.”

From this section it appears that we would be able to then move out of the one half of the house and sell it as it was our primary residence and replaced the original demolished house.

We would then move into the other half of the house and live there for the next 12 months using it as our primary residence. If we were then to move out, as far as I can ascertain from reading the information on the ATO’s site, we would only be up for 3 months worth of CGT where we were living next door and this half was standing empty and was not our primary residence.

What am I missing? Does anyone know if it is possible to do things this way to minimise CGT?

Cheers,
Graham