Selling House and land separately - Stamp duty and CGT implications

[brendio]

I got a draft contract of sale from our solicitor for the purchase of our development property by our trust, as detailed in my other post. As brief background here, we are relocating the current house on the property. The property with be subdivided, and then one block sold back to mum with the relocated house on. Property is currently owned by five family members as tenants in common and are eligible to claim PPOR CGT exemption. The property is in Queensland.

Our solicitor proposed:

alternatively consideration could be given to the house being excluded from the land sale. This would have the effect of reducing the stamp duty payable on the Contract, so I guess that the Contract would simply note that the residence is excluded and the seller has the right to remove same. The seller could then at the seller's expense re-locate the home elsewhere on the land (with the consent of the Trust). In due course a Contract could then be prepared between the Trust as seller and [mum] as buyer for the land. Normally the Stamps Office would require duty on the total value of the property which would include the house then on the land but exemptions can be given for the house provided that the Stamps Office can be shown in a paper trail that the house is owned by the buyer. Because of stamp duty savings, consideration to this course of action should be given. This stamp duty saving was not discussed with [brother].

I still need to work the numbers for the difference involved, and this could be finessed (within reason) by how we apportion the relative values of the house and the land. It is my understanding that a reduced rate of duty applies to property purchased for PPOR, which would be the case for mum, but that this would no apply if she purchases just land. Is this correct? I have skimmed the duties act and it seems to make mention of being able to apply the home rate if a house is built within 12 months of the land purchase.

Also, would it have implications for claiming the PPOR CGT exemption when we sell to the trust if we sell only the land? I know that if you demolish a house before you sell you lose the exemption. In this case, the house would still be there, but would remain owned by the vendor.

 

[Rob G.]

Haven't read you other post to see any details ... but:

5 owners would need to each occupy for the whole time concurrently to claim PPOR exemption for each.

No PPOR exemption if you sell land without your PPOR upon it.

Is there any state stamp duty exemptions for a granny flat arrangement ?

Cheers,

Rob

 

[brendio]

Hi Rob,

5 owners would need to each occupy for the whole time concurrently to claim PPOR exemption for each.

Why concurrently and for the whole time? The property has not been used for income producing purposes, and owners would not claim PPOR exemption concurrently on other properties they own. The six year rule, does that apply to when you move out or to when the property is first used for income producing purposes?

No PPOR exemption if you sell land without your PPOR upon it.

We would be selling with the house still in place, but without including the house in the sale. I guess it could be argued that that is effectively the same thing as selling land without the house physically on it and this is where this alternative will fall over.

Is there any state stamp duty exemptions for a granny flat arrangement ?

Not sure, and not sure how this is relevant.

 

[Rob G.]

Hi Rob,



Why concurrently and for the whole time? The property has not been used for income producing purposes, and owners would not claim PPOR exemption concurrently on other properties they own. The six year rule, does that apply to when you move out or to when the property is first used for income producing purposes?


OK so if none of the tenants in common claim another property as their PPOR.

They have all at least moved into the house each as their PPOR at the earliest opportunity, and have not rented their share whilst absent for more than 6 years.

In this situation you are deemed to have acquired your interest on the first day it is available for income.



We would be selling with the house still in place, but without including the house in the sale. I guess it could be argued that that is effectively the same thing as selling land without the house physically on it and this is where this alternative will fall over.

Not a sale of a PPOR if there is no PPOR sold as part of (attached to) the land.

Not sure, and not sure how this is relevant.


Centrelink and some state stamp duty concessions on granny flats

Probably a relocated house would be new residential property and you would need to consider if GST applies. Associates are counted in any turnover test.

Multiple ownership, shifting/selecting portions for disposal, sale to related parties all require a detailed plan.

Cheers,

Rob

 

[brendio]

There is no granny flat.

Probably a relocated house would be new residential property and you would need to consider if GST applies. Associates are counted in any turnover test.

Multiple ownership, shifting/selecting portions for disposal, sale to related parties all require a detailed plan.

Cheers,

Rob

Different agencies have different definitions of what is a new residential dwelling. My reading of the ATO website is that the relocation would not be considered substantial renovation to make it a new dwelling and so GST is not applicable. The council, however, considers it to be a new dwelling and hence it needs to be brought up to the current building code (insulation, no electric HWS, 6 star energy rating, cyclone rating etc.).

 

[Hillview]

CGT and PPoR

Agree with Rob, without the "dwelling" sold as part of the deal, and that "dwelling" being your PPoR, you can not use the main residence exemption. The law states the dwelling exempt plus up to 2hectare land that is on it.

 

[Rob G.]

There is no granny flat.



Different agencies have different definitions of what is a new residential dwelling. My reading of the ATO website is that the relocation would not be considered substantial renovation to make it a new dwelling and so GST is not applicable. The council, however, considers it to be a new dwelling and hence it needs to be brought up to the current building code (insulation, no electric HWS, 6 star energy rating, cyclone rating etc.).

Relocation of a house on the same original allotment will not be new residential premises.

However, if you have amalgamated titles you have to be very careful because placing a house on an added block will be new residential premises and no part of the older block will qualify for the main residence exemption if you sell that land alone.

Granny flat is merely a term for major concessions in providing a residence for an elderly or disabled relative.

Cheers,

Rob