Developing PPOR into multi-units, implications of keeping 1 unit

[Beanie Girl]

Hi,

If I sell my planning permit for PPOR for 23 apartment to a developer but tell the developer I want to keep 1 apartment, do I trigger CGT? And If I do trigger CGT, how is the CGT computed?

 

[Terry_w]

Yes. but sale of a main residence is usually exempt. If you have a planning permit you may be considered to have moved from a passive owner to a developer and it could be taxable on income to an extent. Complex stuff and expect o pay many thousands for good advice.

 

[Beanie Girl]

Oh, okay, thanks. So if I try to keep an apartment, I will get whacked with CGT somewhat. How about if I sell the PPOR with planning permit to a developer without keeping any apartments, do I still have to pay CGT as I thought selling of PPOR is CGT exempt?

 

[sanj]

Oh, okay, thanks. So if I try to keep an apartment, I will get whacked with CGT somewhat. How about if I sell the PPOR with planning permit to a developer without keeping any apartments, do I still have to pay CGT as I thought selling of PPOR is CGT exempt?

You're talking a multi million dollar sale, pay for some specific advice.

 

[Terry_w]

Oh, okay, thanks. So if I try to keep an apartment, I will get whacked with CGT somewhat. How about if I sell the PPOR with planning permit to a developer without keeping any apartments, do I still have to pay CGT as I thought selling of PPOR is CGT exempt?

Yes you could still be up for tax on your main residence.

 

[Beanie Girl]

You're talking a multi million dollar sale, pay for some specific advice.

I haven't got the permit yet. I'm close to it but it's not a done deal...yet. I am exploring developing it myself but I think it's too hard. Trust me, I have already paid thousands, for specialists, including a planning barrister, expert town planners, traffic consultants, architects, waste management etc. I have asked my accountant the very same question and he didn't charge me for his answer. Thought I'd throw the question out here as I'm wondering if there are different opinions.

 

[Terry_w]

I haven't got the permit yet. I'm close to it but it's not a done deal...yet. I am exploring developing it myself but I think it's too hard. Trust me, I have already paid thousands, for specialists, including a planning barrister, expert town planners, traffic consultants, architects, waste management etc. I have asked my accountant the very same question and he didn't charge me for his answer. Thought I'd throw the question out here as I'm wondering if there are different opinions.

And what did your accountant say?

 

[Beanie Girl]

And what did your accountant say?

If I sell the PPOR with planning permit, I won't incur CGT.
But If I try to keep 1 apartment, I become liable to pay CGT.

 

[Terry_w]

If I sell the PPOR with planning permit, I won't incur CGT.
But If I try to keep 1 apartment, I become liable to pay CGT.

Ask him to put that in writing.

 

[Paul@PFI]

Hi,

If I sell my planning permit for PPOR for 23 apartment to a developer but tell the developer I want to keep 1 apartment, do I trigger CGT? And If I do trigger CGT, how is the CGT computed?

I have difficulty with "keep 1 apartment"...The developer will build that. You don't "keep" anything. I believe that what you are contemplating would involve:

1. A sale of your home that will comprise both cash and a contract for a future apartment (for which you would have no security if the dev collapses I might add) The apartment value being what you and the developer consider it is worth at the time of the contact. Highly likely the main residence exemption may apply to the sum of the contracted value settling the sale. Your contract involves a contract to sell and to buy.
2. Between the build and eventual title you have a contractual right to acquire the property (a contractual right is a CGT asset)
3. On completion you would have a new CGT asset. Cost base being the originally agreed cost. Potentially a minor CGT event with the right ending and a new asset being created at market value. CGT event = minor tax issue ?
4. You would pay stamp duty as the buyer.
5. Developer would pay GST based on the contract price / market value

So I don't believe there is CGT / income tax to pay relating to the idea.

I just have a issue with the planning permit. The nature of the degree of ownership of the lot would be important and if you have sought to proceed based on making a profit on a isolated transaction. s6-5 ITAA97 can mean the main residence exemption doesn't apply (if the sale is ordinary income). If you have resided there a fair time I wouldn't think that an issue. The issue of being too close with the dev by acquiring a lot shouldn't be seen as a joint venture either. Your role appear passive.