Help CGT on more than 2 hectares

S

Sxmurray

I have to sell my POPR to relocate for work and need to understand CGT impact. We bought a place on 7 hectares in 2000 for 175k.
My husband used a shed to work from from 2003 to 2014, and did put in tax returns but never earns enough to pay tax. We never claimed any rates, interest or other property costs as deductions for his business.
The place is now valued at about 500k.

Can anyone tell me if the gain is taxable, what is exempt and how do we calculate, and what is in the cost base. If we have never claimed a deduction for interest can it form part of cost base? We had a mortgage for 100 k originally, but is now 210k as we remortgaged over time and used the money for another unrelated purpose.

So confused......
:eek:
 
Would be subject to CGT in part because u used it to produce income and it could have been claimed - it was claimed as you put it in your tax returns. You also it is over hectares.


You need to speak with an accountant. The house and 2 hectares around it could be exempt and the rest taxable. So you may need a valuation which splits this up.
 
Yes you really need to speak with an accountant but here are a few clues:

1. PPOR exemption is for a maximum of 2Ha so the balance area will be subject to CGT.
2. You can basically choose any 2Ha area that is adjacent to the main residence so best to choose the 2 Ha that gives the best outcome.
3. The cost base for the balance area will be on a proportional basis. So lets say the balance area is land only and the value of improvements on the 2Ha (i.e. buildings, fences etc) are $35K, then the land component is valued at $140 K and the balance area is valued at $100K (5/7th). Value at sale date is done in a similar fashion allowing for any new improvements.
4. Interest can be claimed in the cost base on a reasonable proportional basis. The fact that you have added unrelated borrowings to this loan will make the calculation very difficult.
5. If some of the balance area was used for a small business, then you may be able to access the CGT small business concessions.
 
We will be in this situ in a few years.
Are you saying that the extra land you pay CGT on you can claim the interest incurred in holding that land as your cost base?
If you split your home loan can you allocate the paid off split of the PPOR and the unpaid portion to your loan to the extra 2ha?

Can you claim the cost of paying someone to slash that 2ha every year? The cost of Gorse removal?

If you own the property jointly do you get 2ha and half a house each?

What I find interesting about the governments tax treatment of this is that well in our case the extra 2ha is worthless when separated from the house. Why because it is RLZ and you can't subdivide and you can't build. That devalues a parcel of land. Why do I have to pay tax on something I am not earning an income on and will not earn an income on?

Has anyone been through this? Care to share how you approached it. How you legitimately reduced the CGT payable.
 
CHAOS said:
We will be in this situ in a few years.
Are you saying that the extra land you pay CGT on you can claim the interest incurred in holding that land as your cost base?
If you split your home loan can you allocate the paid off split of the PPOR and the unpaid portion to your loan to the extra 2ha?

Can you claim the cost of paying someone to slash that 2ha every year? The cost of Gorse removal?

If you own the property jointly do you get 2ha and half a house each?

What I find interesting about the governments tax treatment of this is that well in our case the extra 2ha is worthless when separated from the house. Why because it is RLZ and you can't subdivide and you can't build. That devalues a parcel of land. Why do I have to pay tax on something I am not earning an income on and will not earn an income on?

Has anyone been through this? Care to share how you approached it. How you legitimately reduced the CGT payable.
Click to expand...

yes
no
yes
no

see julia hartman's book she mentions this and a few strategies.
 
Terry I think the answer to question 3 is also no. He can claim costs to slash the balance area but not the 2Ha.

CGT is simply a tax on the increase in capital value of the balance area (i.e. that part in excess of 2Ha) less any costs associated with this balance area.

Valuation has to be fair and reasonable so perhaps you could get a valuation as if it was just 2Ha and then another one as 7Ha. Talk to your friendly real estate agent.
 
GaryT said:
Terry I think the answer to question 3 is also no. He can claim costs to slash the balance area but not the 2Ha.

CGT is simply a tax on the increase in capital value of the balance area (i.e. that part in excess of 2Ha) less any costs associated with this balance area.

Valuation has to be fair and reasonable so perhaps you could get a valuation as if it was just 2Ha and then another one as 7Ha. Talk to your friendly real estate agent.
Click to expand...

`Good poinnt Gary.
 
Interesting to read this thread. We are looking for a more than 2ha property so we'll talk to our accountant before purchase to make sure we do this as effectively as possible.
 
Thanks for your replies Terry.

I'll have a read of Julia's book.

Timing the sale of this may also help. Eg waiting until the financial year after hubby retires. I could take 12mth leave without pay and we can minimize tax paid and have a year of r&r together.
 
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