building on PPOR and then selling

[tobe]

So at the weekend a new home in our street went for an obscene price. If we were to do the same, that is knock down our house, build a big new house there and then sell it, are there any tax implications?

We wouldnt be living in the new property at all, however the land (and the old house) has always been our PPOR.

 

[Rob G.]

We wouldnt be living in the new property at all

The no main residence exemption.

Exemption only kicks in when you dispose of a main residence (with certain narrow exceptions).

 

[tobe]

so even if our address hasnt changed? Because we have knocked down the old house and built a new one in its place we would now be liable for CGT?

 

[Rob G.]

You knocked down your main residence, you didn't sell it.

You sold the land with another dwelling that has never been (nor deemed) your main residence.

You never occupied it as a main residence.

 

[Paul@PFI]

So at the weekend a new home in our street went for an obscene price. If we were to do the same, that is knock down our house, build a big new house there and then sell it, are there any tax implications?

We wouldnt be living in the new property at all, however the land (and the old house) has always been our PPOR.

GST on the sale
No CGT exemption (there may still be a capital gain but its not on 100% and its subject to a complex bit of tax magic)
Profit on sale treated as ordinary revenue
Land tax perhaps
Legals
Sub div costs

Just some issues to be considered. The ATO are well aware of the rash nature of many taxpayers in assuming that its CGT exempt. The frequency of posts here on this same topic over and over has been noted by more than one Dep Commr.

 

[tobe]

lucky I checked. SO when is the CGT calculated from? From the valuation of the old house when the wrecking ball goes thru? Against the sale price minus any costs, such as the construction costs themselves and the holding costs etc?

What if I were to occupy the new residence, for lets say, 6 weeks or so, would I still be liable for CGT?

 

[Paul@PFI]

CGT ??? From the description you gave I don't think there is any. Its ordinary income.

 

[tobe]

If we sell our PPOR now, there is no tax. Neither CGT or 'ordinary income' PAYG tax.

The purpose of this thread was to clarifiy if this is still the case when you build a new home on the same site as the previous home first before selling.

 

[tobe]

You knocked down your main residence, you didn't sell it.

You sold the land with another dwelling that has never been (nor deemed) your main residence.

You never occupied it as a main residence.

Thanks Rob, that makes sense. So Id need to occupy the new property for enough time to make it my new PPOR before putting it to market if I wanted to avoid CGT.