How is this scenario taxed?

In 2006 I purchased a house for $160k.

I rented the house out for 12 months, then renovated it (which took another 12 months, in which time the property was vacant). I have a quantity surveyors report stating $40k of works.

I then rented the house out for 12 months, then moved into it. I have now lived in it for 12 months.

I have subdivided the block into 2, and sold a townhouse off the plan for $250k. This is going to cost $155k to build, with $5k for a common driveway and $15k for a garage for the front house.

How is tax calculated on the sale of the townhouse??

Also, if i sold the PPOR for $230k is it tax free given it is my PPOR??

Many thanks in advance.
 
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The house has only been your PPOR for 1/4 of the time you have had it so only 1/4 of the CG on the PPOR will be exempt (assuming you had no intention to develop when you initially bought), but since you've subdivided your initial cost base will be reduced. When you say you have a QS report, is $40K what it actually cost. If the $40K includes your labour, your cost base is only increased by the actual cost.

You have a number of issues which will require detailed consideration.
 
The house has only been your PPOR for 1/4 of the time you have had it so only 1/4 of the CG on the PPOR will be exempt (assuming you had no intention to develop when you initially bought)

Ahh yeh...i thought the 6/7? year exemption may have applied but you rented it out from the start :(
 
Yes, $40k included labour.

So I would assume taxes would work out as follows:

Taxes on existing:

160+40+5+15= $220k cost
Sell for $230k
=$10k profit

Less 50% CGT reduction, less 25% (1 year PPOR out of 4 years owned) = $3,750 profit to be added to taxable income.

Taxes on townhouse:

$155k cost
Sell for $250k
=$95k profit

All of which would be added to my taxable income.

Is there a "land cost" factor taken into consideration for the townhouse, and if so, how is it calculated?

How long do you need to live in a residence before you can claim PPOR and avoid CGT?
 
To make a house your PPOR you must move into it immediately after settlement and not be claiming another house as your PPOR, so even if you lived in your house for the next 50 years it will never be completely exempt from CGT.

A land value will be calculated for your development block but your land value for the original house block will be reduced.

You have not allowed for GST.
 
It's fascinating to see how much due diligence has been done. The GST you pay will be 1/11th of your sale price less the GST you have paid out for the townhouse to be built less possibly part of the GST on the subdivision possibly if the margin scheme applies to the land the GST payable could be reduced further.

I assume you've also factored in that if you owe say $100K now and are borrowing $170K (sale price plus driveway etc) that your bank might put out its hand for the $250K and you could have tax to pay before you sell the original house.

Go and see your accountant. If you're up for GST you will need to register for GST.
 
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