All Topics / Legal & Accounting / Cost base for double block with single house..?

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  • Profile photo of TivsTivs
    Participant
    @tivs
    Join Date: 2018
    Post Count: 2

    Greetings, all with wisdom and experience:-)

    We’re looking to buy a double block in NSW for investment. They are identical blocks except one has a house on it, the other is vacant. We’d like to renovate and sell the existing house, then build and keep a new (rental) house on the other block. The contract currently has the 2 blocks in “one line”.

    We’d like to minimise the CGT on the sale of the existing house. How can we document the purchase in such a way that most of the contract price is allocated to the existing house and land ?

    Some ballparks:

    Agreed price $400k

    Land value $350k

    Renovation budget for existing house $80k

    Market value for renovated house $400k

    Really appreciate your thoughts. Thanks so much!

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

    Sounds like it might be on revenue account or partially capital and partially revenue.

     

    If you can get it on capital account you could potentially renovate, live in the first house for 3 months and sell it CGT free.

     

    If you just want to reno and sell it would probably be on revenue account which might have a similar outcome anyway. Don’t forget to get advice on the GST aspects.

     

    as for cost base you would need to apportion between the 2 factoring in both the land and the house.

    see s 112-25 ITAA97 and s 112-30ITAA97

     

    Don’t forget the deductibility of interest 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 TivsTivs
    Participant
    @tivs
    Join Date: 2018
    Post Count: 2

    Thanks so much Terryw! This would be the 2nd time you’re helping me with a thorny question. Would you like a new client? :)

Viewing 3 posts - 1 through 3 (of 3 total)

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