PPOR + house next door then subdivide - CGT?

Hi,

I have a potential opportunity to purchase house next door to my parents PPOR. Both on a corner which equates to approx 1800sqm. My father had plans for two large plots on his block but if I purchase next door could potentially have six smaller blocks.

He purchased the property in 1981 and I read the ATO Article on subdividing and amalgamating land, my understanding is that the subdivided blocks (from his original block) are deemed to have the same acquisition date as the original parcel of land. The plan is to sell the blocks, not to actually build, so in theory could he sell the blocks with acquisition date of 1981 and no CGT??

The issue I see is that one of the blocks would have to be made up by part of both original blocks. Would that create an issue for the CGT of my parents original block? Would they be better off selling me that part that we need for the block in the middle?

Anything else to consider, other options to minimise CGT?

Appreciate all feedback and info.

thanks
OG
 
hi OG

Interesting question.

I am overseas ATM and haven't done any research, but I would think the improvements to the property would have CGT applicable because they are post CGT assets.

Got to watch out for inheriting the property too. Once you inherit it the cost base will be the market value at the date of death.
 
Thanks Terry, it's a tricky one...

Another related question, if you sold part of your PPOR land to the person next door, i assume that would be CGT free? Then in a years time you decided to subdivide what is remaining would that also be CGT free, or have you changed the CGT status by selling previously?

Thanks
 
Keep in mind I am not an accountant.

Generally your PPOR and land up to 5 acres would be CGT. So I imagine that if you cut off part of your block and sold it and the block was under 5 acres beforehand then it would probably be CGT fee. And the subsequent sale of the remaining house and land would be CGT free too - assuming not rented out or ever income producing etc.
 
Thanks Terry, it's a tricky one...

Another related question, if you sold part of your PPOR land to the person next door, i assume that would be CGT free? Then in a years time you decided to subdivide what is remaining would that also be CGT free, or have you changed the CGT status by selling previously?

Thanks

The land sold would not have a main residence on it and so would be subject to CGT.

You would need to apportion the cost base of the land sold.

Cheers,

Rob
 
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