from
www.bantacs.com.au
"Purchased To Use As Your Home:
This section assumes that the property is 2 hectares or less, you have owned it for more than 12 months and
you have only used the property as your home up until the subdivision. If the property is larger and/or has
also produced income while you were living there, you need specific advice and should read the example for
farms.
The property would normally be exempt from tax because it is your main residence. But this is only if you
sell it as a home. So if you cut a block off and sell it there will be no main residence exemption at all because
you are not selling your home. Your exemption would remain with the block your home is on. Here is
another trap, if you demolish that home and sell vacant land you will completely lose the main residence
exemption for the whole time you owned the property. To qualify for the main residence exemption there
must be a dwelling on the property at time of sale, though this can be a caravan. If you sell vacant land after
demolishing your home you will be up for CGT on half (assuming held for more than 12 months) the
difference between the price you paid for it plus costs and improvements less the selling price. If you
purchased the property after 20th August 1991 you can also reduce the gain by the cost of rates, insurance,
repairs, maintenance and interest section 110-25.
If you are a builder or developer by trade and you start to cut up the family property you are more likely
than other professions to be considered applying the property to a business. Other professions subdividing
their own home into a small amount of lots would be very unlikely to be considered to applying the property
to a business rather than merely realising an asset. Though to play it safe don’t sell the blocks yourself,
organise this through a Real Estate Agent.
If you are subdividing your home block and you do not normally develop land or build houses you need to
limit your activities to the extent that you will not be considered in the business of developing the land. If you
simply apply to council for approval of the subdivision, and sell your home together with the land up to 2
hectares, to a developer you will not pay a cent in tax because of your main residence exemption. If you cut
the land up yourself, you are starting to get involved in development activities and you start to cross over to
business operations. You will be subject to tax on each block you sell other than the one with your home on
it, but the tax will be at least half if you can stay within the CGT provisions because you are merely realising
an asset rather than starting a business operation. More detail on this is in the section Are You Merely
Realising an Asset? You should be safe if you simply do nothing more than what the council requires under
the conditions of the subdivision (ie water, roads) and then engage a real estate agent to market the lots for
you."
