Buying PPOR in a trust and sub-dividing

[PT_Bear]

I know this has been discussed before, but I wanted to put another spin on it...

I've just bought a house with a large land component which will by my PPOR. I know from a tax point of view that I'd be better off if I rented this house from my trust as I'd get lots of deductions, but if I sold it I'd miss the CGT exeption.

The thing is that one day I might wish to sell, but I'd probably sub-divide the land first. Sub-division would probably mean subdividing through the middle of the house, which does not lend itself to this purpose.

1) Would I have to demolish the existing house to sub-divide the land (it would be demolished eventually, but I'd prefer not to do it until after the sub-division)?

2) After sub-division would I still get the CGT exemption if it were originally a PPOR under my name?

3) Could I get the PPOR exemption if I bought it in a trust and also got the tax benifits of renting/gearing in the trust in the meantime?

I'm consulting my accountant on this at the moment, but I'd be interested in any opinions and background material.

[Aceyducey]

PT_Bear,

There are some pretty clear guidelines from the ATO on how this is handled. I can't recall them offhand (See_Change probably would) but you can find them from the ATO site.

Cheers,

Aceyducey

[see_change]

Not sure on a definitive answer but these are some things to think about.

I'd be fairly certain that you'd loose the PPOR exemption if you hold it in a trust.

My understanding from the CGT tax point of view is that when you demolish the existing PPOR you'd be considered to have created two new assets which are viewed from the CGT view point as having been created when you first bought the property.

The PPOR status probably is transferable to one block. If you built on one and lived there ( I think ) it will maintain its status as your PPOR so is exempt from CGT.

If you sold the other block at this stage it would be subject to CGT.

One thing to check on is whether you can build on one block , then sell it after one year as you PPOR ( so no CGT ) . While you're living in the first house , you build the second house and move into it as your PPOR after you've sold the first one. My understanding in this senario is that the first sale is CGT free , but the second sale would attract CGT based on an apportionment comparing the time from your original purchase to moving in to it, with the length of time you actually live there prior to eventually selling it.

In NSW you need to demolish prior to being able to complete the subdivision.

You can get a subdivision approval that is subject to you fullfilling certain criteria eg, completing construction / demolishing according to a BA.

See Change

[PT_Bear]

Thanks guys, that's very useful.