Building Duplex and Tax

[CharlieW]

Hi all

I currently own a rental property and have now decided to knock it down and build a duplex on it. The intention is to live in one side and sell the other. I have been told I should be able to apply CGT to the profit I make when I sell. Some questions on this:

1. The construction will occur over 2 financial years. For the expenses I have incurred so far on the construction in this financial year do I need to report these in my tax return in a business schedule to carry forward the loss? Or do I simply keep all the receipts and add it to the cost base when I sell in the next financial year?

2. For the 50% CGT discount, when does the 12 months start date apply? Is it the time when I bought my rental property or when the duplex is completed?

Thanks for all your views in advance (I will also be talking to an accountant this week).

Cheers
Charlie

 

[Propertunity]

Julia Hartman's site has some useful booklets on this:
http://bantacs.com.au/booklets.php - see the one on how not to be a developer.

 

[Colin Rice]

Thanks for the link Propertunity.

Looks like an excellent resource hub written with humour as a bonus, as per second last chapter on page two!

 

[CharlieW]

Thanks, I did read the bantacs developer booklet which was very informative.

I was sort of looking for more details on how I should be reporting my construction expenses if I was eligible for the CGT path as the construction would go over 2 financial years. i.e. report expenses now and carry forward loss vs keeping all expense receipts and adding this to the cost base when I sell.

Also for CGT how the 12 months hold period would be calculated (IP buy date vs duplex completion date)?

Cheers
Charlie

 

[WilliamB]

I'm sure a proper bean counter could answer this more accurately, but if you are talking about financial reporting for a capital asset I'd expect you would "capitalise" the costs to the Balance Sheet, ie all costs for the asset increase the asset. Cash decreases/liability increases (in the case of bank loan), asset increases.

Not convinced CGT would apply here tho, if the intention is to sell for a profit.

CGT timing over my head. I suspect it may be some sort of combination of both, or the IP purchase date. Guessing tho.

Happy to be corrected here.