Sub-division

From: Apocalypse .


Hi all

I am what you would call a lurker in the sense that for probably the last 18 months all I've done here is read and not contribute.

But now I've got a question:

If you buy a property, hold it for 1 year and 1 day, divide a block off of it and sell the newly created block, how does the 12 month capital gains discount apply?

Is the block deemed to be a "new" asset and need to be held another 12 months, or does it instantly become eligible for the discount (if sold)?

Also, if you divide and hold, the "new" block is non-income producing and hence not able have its expenses deducted, but can this be avoided by renting both titles to the one tenant?

Thanks in advance
Apocalypse
 
Last edited by a moderator:
Reply: 1
From: Denise Macadam


Hi Apoco,
Just a basic answer for you - no you have already had the property for your 12 month period. The "new title" may then be sold off without holding onto it for another 12 months. Would a tenant want the second title included in the lease, do they gain by this in some way?
"Holding onto the "new title" for another 12 months."
Do you have any council restrictions on time limitations for having to build on this new title from the time of subdivision, that would be a consideration i imagine.
There are much wiser folk on this forum than I, who can help you further.

Have fun Apoco
Regards
Denise
 
Last edited by a moderator:
Reply: 1.1
From: Michael Yardney


HI
I'm not licensed to give this type of advice, but I've done lots of subdivisions.
We also covered this topic in our newsletter a couple of months ago (you can get the FREE newsletter at subscribe@metropole.com.au)
There have definitely been tax rulings on this specific issue.
By creating a subdivision you are changing the nature of the asset and the 12 month rule for capital gains tax does not apply.
What is critical is you intention when you purchased the property and why you undertook the subdivision.
It would be difficult to suggest that your motive was not profit and therefore you should be taxed on the sale as trading profit.
It's a complicated area. Seek proper tax advice.
Michael Yardney
Metropole Properties
 
Last edited by a moderator:
Top