CGT on PPOR subdivision

One for the accountants.

I'm in the process of subdividing a block which is my PPOR and have a few questions regarding CGT.

I purchased the house on 11 acres in DEC 2007 and I'm in the process of subdividing into two 5.5 acre blocks. I know that I'll be liable for CGT on the sale of the vacant 5.5 acre block but have the following questions-

-I'd like to hold the vacant block for 12 months before selling so as to halve the CGT payable. Does that 12 months start from Dec 2007 when the land was purchased or from when it is subdivided onto a seperate title?

-How would the purchase price of the newly created vacant block be determined for CGT purposes?



Thanks

RC
 
Because your property is bigger than 2 hectares and you will have approx 2 ha left with your PPOR, an apportionment of the original cost will need to be calculated.

Look at what methods might be available to increase your cost base
 
Does that 12 months start from Dec 2007 when the land was purchased or from when it is subdivided onto a seperate title?
Now *that* is something I'd love to know too.

The base price thing for CGT, according to the ATO website, is just apportioning it off from the original purchase price and allowing for apportioned fees for the subdivision.

Annoying how the ATO site doesn't tell you when the 12 months starts.
 
Thanks for the links BKR.

RumpledElf,

From the ATO site "The date you acquired the subdivided blocks is the date you acquired the original parcel of land"

The way I read it, that might be the answer. 12 months from the date that the block was acquired, which is deemed to be the date on which the land was originally purchased. I think! This has my accountant stumped as well.


Thanks

RC
 
If that's stumped your accountant tell him/her to look at Section 112.25 of the 1997 Act. The subdivision is not a CGT event. Therefore the acquisition date for you is the date of your contract for purchase.
 
I must have missed that in the fine print. Sweet! I suppose that counts if you build a house on some land you bought a year ago too?
 
One for the accountants.

I'm in the process of subdividing a block which is my PPOR and have a few questions regarding CGT.

I purchased the house on 11 acres in DEC 2007 and I'm in the process of subdividing into two 5.5 acre blocks. I know that I'll be liable for CGT on the sale of the vacant 5.5 acre block but have the following questions-

-I'd like to hold the vacant block for 12 months before selling so as to halve the CGT payable. Does that 12 months start from Dec 2007 when the land was purchased or from when it is subdivided onto a seperate title?

-How would the purchase price of the newly created vacant block be determined for CGT purposes?



Thanks

RC


Appaling. You need to sack your accountant. If you are going to keep another lot for 12 months after you sold the PPOR on the other? What prevents you from declaring new lot your PPOR and claiming CGT exception?
 
His initial area of the property is larger than the exemption available for PPOR which is why his spare block will be subject to CGT for the period from date of purchase
 
His initial area of the property is larger than the exemption available for PPOR which is why his spare block will be subject to CGT for the period from date of purchase

Thanks a lot. Would it be a big deal for you to point me to some link where I can read about that 2 ha limit on CGT exemption?
 
Thanks a lot. Would it be a big deal for you to point me to some link where I can read about that 2 ha limit on CGT exemption?

Ok, I have figured it out myself. Problem is not with the initial 4.4 ha block, problem is that oyur PPOR is on 2.2 ha block, which is .2 ha larger than would qualify for an automatic exemption.

If I were you, I would apply for the private ruling as to whether the house tyou have sold qualifies for the exemption. Please note that subdivision at this stage is completely irrelevant (As it was pointed out - it is not CGT event).

If ATO confirm the exemption - it would open the door to CGT exemption on the other block. Little creativity required - but not a rocket science. It was in the last youer API magazine how to do it in a proper manner.
 
Appaling. You need to sack your accountant. If you are going to keep another lot for 12 months after you sold the PPOR on the other? What prevents you from declaring new lot your PPOR and claiming CGT exception?

To be fair, my accountant is going to get back to me after he's looked into it. He didn't know off the top of his head.

I'm not selling the PPOR at this stage, just looking at selling the vacant block.


RC
 
To be fair, my accountant is going to get back to me after he's looked into it. He didn't know off the top of his head.

I'm not selling the PPOR at this stage, just looking at selling the vacant block.


RC

Sorry, I misunderstood. In that case you have got to pay CGT. I can not give any advice because I do not know what your situation is, but if I were you I would rather sold PPOR CGT free and built new house on a new block to live in.
 
Sorry, I misunderstood. In that case you have got to pay CGT. I can not give any advice because I do not know what your situation is, but if I were you I would rather sold PPOR CGT free and built new house on a new block to live in.

That might be a good option. I'd thought about it but not from a CGT point of veiw.

RC
 
Sorry, I misunderstood. In that case you have got to pay CGT. I can not give any advice because I do not know what your situation is, but if I were you I would rather sold PPOR CGT free and built new house on a new block to live in.

You get an exemption for your PPOR and up to 2ha of land (subject to tests).

If you build a new PPOR on the adjoining block just to save CGT on selling some land today, it had better be a significant tax saving !!!

After all, you will pay CGT on the land under your new PPOR for the period owned prior to this !

Really you need to do a discounted cash flow analysis, because effectively you are incurring the cost of building a new house just to defer some tax you would have paid anyway.

Cheers,

Rob
 
You get an exemption for your PPOR and up to 2ha of land (subject to tests).

If you build a new PPOR on the adjoining block just to save CGT on selling some land today, it had better be a significant tax saving !!!

After all, you will pay CGT on the land under your new PPOR for the period owned prior to this !

Really you need to do a discounted cash flow analysis, because effectively you are incurring the cost of building a new house just to defer some tax you would have paid anyway.

Cheers,

Rob

Thanks Rob,

Strictly speaking it has to read 'After all, you might pay CGT on the land under your new PPOR for the period owned prior to this (if your accountant is hopeless in forward planning) !'

But even without any creativity, if you sell your new house say 5 years from now, the value of dollar then will be 50 today's cents - courtesy of inflation.

I really feel sorry for poor buggers who bought this 'deleveraging' rubbish and start to pay off debts and save. With the Governments printing money non stop values of savings and debts will be wiped out before you blink.
 
Since we're doing pretty much the same thing, we're planning to build a new PPoR on the vacant block. Hard part is funding it since we need to sell our current house *first* to pay for it.

Fortunately I still have a spare house (which is already well and truly subject to CGT) sitting 35km down the road we can squat in while we're waiting for a new house to be built. Annoying, but might be the only way to do this. The CGT component on the land is miniscule after the initial costs and subdivision costs are taken off, unless land prices here go up something severe in the next year. I think I worked out we'd be up for about $3-5k each that we'd have to pay CGT on.
 
Top