All Topics / Help Needed! / Some tax questions regarding subdivision?

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  • Profile photo of NanNan
    Participant
    @nano
    Join Date: 2015
    Post Count: 26

    I want to subdivide my own house.

    After completion, if I sell both of them, do I need to pay any tax for the benefit?

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    Will it be a vacant block or will you construct a property/s as well?

    You will be taxed inline with what ever tax bracket the profits lift you into assuming you are PAYG employee minus any costs associated with the development.

    PPOR profit will be CGT free so only be taxed on the IP profit. If you can hold onto the IP property for 1 year you may be entitles to a 50% deduction on the CGT.

    Even better if you move into the new IP, assuming you are building a dwelling on it this could be CGT free.

    Seek legal advice and / or wait for @Terry_W to comment :)

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Yes. Tax will be payable.

    Don\’t forget GST too.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of NanNan
    Participant
    @nano
    Join Date: 2015
    Post Count: 26

    Thank you legends

    Currently we live there and plan to demolish the house and build two.

    To get the best profit, after we demolish current house and build two, is it better to sell one as PPOR and live in another one? And It will be CGT free?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    You had better get tax advice asap.
    The second one cannot be CGT free as the exemption doesn’t apply to land. So when you split the land portion relating to the second property will not have any exemption back to the point you purchased it.

    First step is to work out if CGT even applies. “Developing” generally means income tax and not CGT so no exemptions at all. But if you are just realising an asset CGT may apply. The main residence exemption may apply for the first one – but if you knock it down it may not.

    Don’t forget the finance side. You have to structure this so as to maximise deductions.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

Viewing 5 posts - 1 through 5 (of 5 total)

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