Hi all,
I want to clarify something on CGT.
I am looking at a property for $200,000, need to invest $20,000 on reno. I also subdivide it into two blocks (another $20,000) and sell the house off for $220,000 but keep the land to build another house.
I smy understanding correct, that I do not pay CGT as I have invested $240,000 but only made $220,000, therefore having made a ‘loss’
Clarification would be great.
Hello Bridgebuff
No, your understanding is not correct.
Just using your figures here is how I think it will work assuming that the two blocks that you subdivide into are of equal size and that the house is worth $80k.
cost of land $120,000
cost of house $80,000
cost of subdivision $20,000Cost base for block 1 (the one with house) = $60K + $80k + $10K + $20K (reno)
CG = $220K (sale price) – $170K
The cost base for the second block will be $70K.
Of cause this is very simplistic and doesn’t take into account buying and selling costs etc. It’s just meant to demonstrate how the purchase price is apportioned on a subdivision.
Hope this helps [smiling]
Elka
ATO website or talking to them are sometimes useful. Make sure you keep every receipt.
Hi Bridgebuff,
I agree with Elka, I believe there will be a CG event in your strategy.Kylie S
Mortgage Consultant & Property Investor
0412614965
[email protected]Thanks, not what I wanted to hear so [angry2]
I think the news is worse, however you should speak to a tax accountant. It could be that you are entering into an enterprise and should register for GST. 1/11th of the profit (approx) will be payable as GST. the balance would then go in your tax return as normal income… CGT would not apply as that only applies to the realisation of a passive asset
I am pretty sure that this will only apply if I do heaps of these.
I will check it out with my accountant.
Many thanks for pointing this out.
like with all tax things its up to you how far you push it. I agree for a one off I would let it slide, however the GST guidelines are quite specific in saying a one off property transaction is caught under the system.
od course with the recent revelation that the CGT compliance section of the ATO is in disarray you may wonder whether you want to bother decalring it at all!!! [blink]
Hi All
What about if you lived in the house as your PPOR?
How long would you have to live in the house so that there would be No CGT? Is it 6 months?I am looking at a similar venture.
Thanks
Demkel
My understanding is that there is no clear length of time. You must have lived in the property for the whole time you owned it (if you had it renovated as soon as it was practical).
The tax office cites times of 3 month. It is all fairly complicated and you best look into it yourself on the ATO site:
http://www.ato.gov.au/individuals/pathway.asp?pc=001/002/026&mfp=001/002&mnu=1051#001_002_026
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