All Topics / Legal & Accounting / How is the buy price aportioned for a subdivision when calculating CGT

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  • Profile photo of darkness72darkness72
    Participant
    @darkness72
    Join Date: 2013
    Post Count: 51

    Apologies if you have seen this Q on another forum, I’m hoping for a quick basic answer

    I’m trying to chase my accountant for an answer but I need a ball park figure re CGT

    example – I purchase property for 500k

    – I subdivide property in 1/2, front existing house, and build new house on back 1/2 for 300k

    – I plan to imminently sell the front house for 600k

    Assume I’m at the highest tax rate. and I know that there are probably a lot of other figures…
    All the online CGT calculators don’t tell me how to factor for subdividing the land in 1/2…..
    Does that mean I basically have to cut my purchase price in 1/2? to 250k?
    ie: in basic terms …….. 350k CGT = approx 80k tax…?
    I’m guessing and hoping it cannot be quite like that – surely not that much

    How is the buy price aportioned for a subdivision when calculating CGT

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    CGT probably won’t apply.

    Assuming it does,

    get a valuer in and work out what each block is worth. This should give you a % which u can use to apportion the original price and costs. Any specific costs to each block should be taken into account for the cost base for that block.

    You cannot cut in in half because one block has a house.

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

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

    Profile photo of darkness72darkness72
    Participant
    @darkness72
    Join Date: 2013
    Post Count: 51

    Hi Terry,

    I found this link, my limited accounting mind has me not sure how to interpret this….

    http://law.ato.gov.au/atolaw/view.htm?locid=txd/td973/nat/ato

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Its pretty straight forward. Have a look at the examples.
    Consider example 3 – it may be a way to reduce tax.

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

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

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