Built new house now subdividing tax ???

Hi all
My very painful long stress filled depressing attempt at being a developer is nearing the end.
Encased sewer done
Existing dwelling renovation done
New garage done
New 4 bedroom house done

Now just some paperwork to finish the subdivision .

My question is should I be valuing the house( both original and new) for future tax liabilities?
I will organise a depreciation schedule but I'm more concerned about values and future capital gains.

Is the value just what it has cost me( house + subdivision cost)
What about the land value and the slight loss in value of the original house due to reduced land size.

What's the norm here

Cheers
 
Any ideas guys.

What's the cost base of my new house after subdivision ? Us it
House cost
Subdivision cost
Land works specific to the new block.

What happens to the original house and land that is now smaller and theoretically has had some value removed due to smaller lot size ???

Not sure what I should be doing at this point.

Cheers
 
The cost base of each subdivision is the cost of the land divided between the two. So the land should be valued at the time you purchased and apportioned. Plus the cost of subdividing apportioned.

Then add the balance of the original purchase price of the old house plus any further improvement costs to the old place and building costs of the new house to the new place.

Hope that makes sense.
 
Thanks for the reply

Not sure if I have it so using rounded rough numbers

$300,000 = purchase of original house
$30,000= original house renovations

$50,000 subdivision costs( 60% land to original house)

$200,000 new house purchase built on 40% land.

Purchased in 09
Started process in 2011
House finished last week.

Subdivision should take place in 4 weeks.

How would I work the cost base out.

Cheers
 
I'd split the subdivision costs between the two equelly as it affects both anyway.

The $300,000 = purchase of original house is the issue.

You have to get a valuation of the total land cost in 2009 purchase date, then divide this cost 60%-40%. Then the original house cost becomes $300,000 less the cost valuation of the land.
 
I'd split the subdivision costs between the two equelly as it affects both anyway.

The $300,000 = purchase of original house is the issue.

You have to get a valuation of the total land cost in 2009 purchase date, then divide this cost 60%-40%. Then the original house cost becomes $300,000 less the cost valuation of the land.

Ok so assuming a flat market since 09 and the vacant 1000 Sqm corner block next door selling for $215,000 (similar to mine)

Original house would be

House minus land = $85,000
60% of land. = $129,000
Renovation. = $30,000
50% sub cost = $25,000
New cost base is $269,000 ( down from $300,000 so more cgt to be paid )

Second block

New house =$200,000
40% of land =$86,000
50% sub cost =$25,000

Initial cost base is $311,000

Does this sound right ?

Cheers
 
Ok so assuming a flat market since 09 and the vacant 1000 Sqm corner block next door selling for $215,000 (similar to mine)

Original house would be

House minus land = $85,000
60% of land. = $129,000
Renovation. = $30,000
50% sub cost = $25,000
New cost base is $269,000 ( down from $300,000 so more cgt to be paid )

Second block

New house =$200,000
40% of land =$86,000
50% sub cost =$25,000

Initial cost base is $311,000

Does this sound right ?

Cheers

That's it.

You've taken a big chunk of cost base out of the original $300,000 because the land had a very high value compared with the original house
 
That's it.

You've taken a big chunk of cost base out of the original $300,000 because the land had a very high value compared with the original house

Thanks for the help.
The only bit that does not Gel is the original house value.
The land value is about right off past sales but $85,000 for the original house is low.
It's 40 years old but its a big 4 bedroom fibro 2 bath with double garage and attached to it is a 70 Sqm self contained flat.
In this case what takes priority similar land value or house value ????

Cheers
 
TR 95/D15 (withdrawn but still the Commissioners views) said that the 'anticipated selling price' methodology was the most appropriate method for allocating costs across subdivided areas.

However any reasonable basis will be accepted providing it matches costs with revenue. could use

1. area basis - ato considers this to be fairly accurate
2. total number of lots - ato doesn't like this method and says it is fairly inaccurate. in an audit you would have to justify that it is accurate. seen cases where the total number of lots method was denied with penalties and interest for the taxpayer.
 
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