Subdivision - CGT & GST

The Corner block of land next door to my PPoR has come up for sale.
Currently my block is slightly too small to subdivide but if I purchase next door I could subdivide a good size block across the rear of both properties resulting in 2 houses plus a vacant lot.

Currently I am putting together a feasibility to work out if there is any profit potential however I have run into a bit of a hurdle in relation to the tax implications.
On completion of the subdivision I would like to sell at least 1 of the 3 properties, which property I sell will most likely depend on the tax implications.

Based on this and the information below; I would like to know:

1. Are the Options listed below going to be considered a business income, therefore subject to GST and no CGT discount?
(I expect this is the case as I am purchasing next door in order to subdivide, although option 2 may be taken as upgrading to a new house)

2. Does anyone have an opinion of what option would be subject to the least tax?

3. Can anyone recommend a good Accountant to help me out in Fremantle/Perth?


House 1:
•PPoR (purchased using first home owners benefits)
•Purchased Nov 2011
•Purchase Price: $445,000 (approximately land value at the time, house had little to no value)
•Stamp duty and legal costs: $0 stamp duty, $5000 other costs
•Estimated Value now: $570,000 ($30,000 in reno’s)
House 2:
•House next door on corner block
•Purchase Price: $670,000 ($580,000 land, $90,000 Structure)
•Stamp duty and legal costs: $32,000
Subdivision:
•Subdivision costs $80,000
•30% of each of the current properties used to create new block.
•Vacant Block value: $480,000
Estimated Sale Values:
•House 1: $530,000
•House 2: $620,000
•Vacant Lot: $480,000
•New Lot with $300K House: $900,000 (2 years after purchase of House 2)

Option 1: Subdivide and sell vacant block. (do I pay CGT or GST?)

Option 2: Subdivide, Sell House 1, Build and make vacant lot new PPoR, Retain house 2 as rental.
(Is this new PPoR subject to CGT or GST if I sell in the future?)

Option 3: Sell all but one property. (What one is best to keep?)
 
Advice

Looks complicated and arguably nobody is going to give their expert knowledge for free without shortcuts. My best advice is avoid getting opinions here and get advice. Heard of the surgeon doing good free work on the net ? Me either.

It may be subject to CGT rather than treated as business income. "It depends". Problem #1 - What % land is being subdivided ? There is an apportionment issue. The house affects it too. You might need a valuation. You know that main residence land subject to subdiv is not exempt from CGT dont you ?

Then there is the GST issue too. You may have a CGT and GST issue. Registration might be required since the sale may trigger the thresholds. Then there is timing - No CGT discount & it might as well be business income.

A local accountant is what you need. Lots to talk about and ongoing too. Find one who has developers as clients.

Paul
www.pricefinancial.com.au
 
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