is CGT payable in this instance and if so how much?

[alpina]

hi all,

long time since ive posted

we are currently looking at a dipilated house to possibly knock down and rebuild as our dream home.

we currently have our ppor which we will eventually sell when our dream home is built.

assuming that the dipilated house is never tenanted, is there any way to get around the cgt and if not how does it work at the end of the day? for eg, if dipilated house costs $500k and 3 years later we build our dream home at a cost of another $500k and then 5 years later we sell for for $1.5m, what am i actually paying cgt on bearing in mind that at no pt did the property generate an income?

thanks,

julie

 

[coopranos]

i thought you were building PPOR on the block?? If so, you are fully entitled to the main residence exemption on that property. If you sell your current PPOR as you move into the new one, you will get the exemption on that also (on the facts provided)

 

[julia]

Julie,

You can only have your PPOR exemption on two properties for a period of six months that works backwards from the date you sell the first house section 118-140. I would guess this means that you will be exposed to CGT on one of them. It is up to you. You can choose to back date your PPOR exemption on the delapidated house and vacant land for up to four years before you move into it section 118-150, if it is being renovated or vacant land or you are in the process of building.
If you choose to leave your PPOR exemption with the old house during the overlap then one day when you sell the new house you will be exposed to CGT on a small portion (works on a time basis) of the gain. You get to include in the cost base the full price of the purchase of the old house plus demolishing costs plus new building costs plus buying and selling cost. Also section 110-25 (4) allows you to increase the cost base by all your holding costs ie interest, rates, insurance, mainentance and repairs. So if you keep good records (ie lawn mower fuel, light globes etc) you may not actually have a capital gain.

Julia
www.bantacs.com.au

 

[alpina]

thanks julia,

that was the sort of detail i was looking for

cheers,

julie