Consolidate Land on 2 separate titles

[albanga]

Hi All,
I am looking at another scenario with my friend and I just had a couple of questions regarding consolidating land.

Scenario - Friend owns property with his name on title and is looking to purchase neighbors property. Once acquired is keen to sell the land to a developer for a premium.

Questions:
Is it simple to consolidate adjoining land if you own the title to both properties? Or is this not really required? Are you able to perhaps sell both parcels separate and the developer can purchase them consolidated within a set structure.

What are the affects of CGT if consolidated and sold? Would half the property be exempt if it is your PPOR or does the clock re-set?

Thanks in advance
Ben

 

[Terry_w]

What do you mean consolidate? Join under 1 title? This should not be necessary.

If separate residences the owner could only live in one of them at anyone time and would unlikely get the main residence exemption across both. If living in both it could possibly be adjacent land perhaps s118-120;

 

[albanga]

Terry by consolidate I did mean put under the same title.

The scenario is he has his Current PPOR (CGT exempt if he were to sell).
He is considering buying his neigbors property which has an existing residency.

If he was to purchase that and then sell them together would I be correct in assuming he would be exempt of CGT on the existing property but liable on the new property?

If so then this is interesting because let's say PPOR is worth 900k and new property worth 700k but together they are worth 2million? What would happen in the event you sell to a developer the PPOR at 1.3 mil and new at 700k hence no gain. I know this would not fly with the ATO ofcourse.

I also appreciate this is fairly high advanced and professional advice is a necessity. Like always though just trying to flesh it out a little.

 

[Paul@PFI]

Incorrect assumption as separate CGT assets exists and continues to exist irrespective of actual title deeds. If the intent is selling so soon after acquisition then a profit making intent overrides the MR exemption. Not even a CGT event and it could taint the original main res exemption on the other title.

Personal tax advice is essential in this instance.

 

[albanga]

Thanks Paul!
I did say to my friend that I would definitely be concerned about the PPOR exemption if you sold immediately.

 

[Paul@PFI]

I would also be concerned for the possibility that GST could impact.
It may be a fairly easy argument that an enterprise exists and that the land is a taxable supply if its not existing residential. Perhaps even the house ??

The problem with the GST is that if you ignore it then 1/11th of the value is gone which could be a huge chunk of the profits. House or no house on the land.

There is a method under the margin scheme and CGT rules which could minimise the impacts of tax and allow CGT exemption. It comes at a cost. You must trigger a CGT event. It could be in a different period to the sale. Timing is key. The developer may or may not like the GST too. If the margin scheme is used to reduce the impact they cant claim GST...But shouldn't be a issue as developers often buy land from unregistered vendors also.