Is PPOR exempt if it is a development as well

[eggnog]

I had this random thought today.

Say you saw a property with big development potential and purchased it as your PPOR. Are you still exempt from paying CGT if you develop the property and sell it off?

ie: purchased a big acreage as PPOR, subdivided and sold off the individual lots.

Or what about if you purchased a medium/high residential property as your PPOR and got DA for a huge unit complex then sold off to developer.

Are such scenario's exempt from CGT because it is your PPOR?

 

[HD_ACE]

No.

But adding value via development approvals, plans and permits on the other hand could be worth looking into

Cheers

 

[eggnog]

lol HD Ace. That was a short answer. Any reason why it isn't exempt? I would have thought that since it is your PPOR and you are living there then it should be exempt.

 

[HD_ACE]

Because if it was i would be doing it for a living

I am not qualified to answer with great certainty so will leave that to our experts.

But some of it will possibly be CGT free. I would imagine the land and/or cost base would be reapportioned to suit how you have developed if the original house is left in place.
Demolishing and building new /subdividing will be a whole other can of worms.

Professional advice would definitely be on the cards

 

[Paul@PFI]

If you acquire a large lot of land with a house UP TO 2ha it is eligible for the CGT main residence exemption. The balance is always subject to CGT if the land is larger.

If you acquire just under 2ha and subdiv and sell some off you must apportion the original acquisition cost into the relevant parcels. Your choice is to use either:
1. Actual cost (NO CGT)
2. Market value (CGT is triggered BUT it can benefit the profit on sale as its starting cost will be higher. One catch to the MV method is to consider timing of the CGT event for cashflow.

There is a deemed sale and acquisition when you start the development (s70-30 ITAA97). The land being sold is now "trading stock" based on that cost or MV...When its sold that value counts towards the profit calc. Any profit is taxed as ordinary income (no 50% discount).

If you build on the land then sell the sale will be subject to GST too. ("New" residential premises sold for the first time.)

Your question about a DA appn then selling but not doing the build is actually a clever point. It doesnt trigger trading stock or CGT and there is no GST. Just dealt with a client who sold land worth $700K for $1.2m on this same basis. The developer bought four adjoining blocks and together these lots will be a large unit block.