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I have a PPOR that I want to build 3 units on. How does it work in principle for CGT purposes when the PPOR with one house on it turns into 3 separate titles with 3 units on it? It would be built strata.
I've always wanted to know the answer to this.
I think it has something to do with you taking a valuation of the property before demolition and construction and the CGT is on that valuation to the end valuation upon sale at completion.
So I think it's:
1. Buy PPOR for $400k
2. Value PPOR at $500k when you are ready to develop
3. CGT is from $500k not $400k
I could be totally wrong though.
The main point I am confused about is which part becomes tax free if I decide to live in one (One of them will be my PPOR).
This is generally how it would work, but it would probably be just income tax if developing.
There is a good PDF document on the Bantacs website 'how not to be a property developer'.
There is a good PDF document on the Bantacs website 'how not to be a property developer'.
I'm looking at a similar situation and have read through that pdf 'How not to be a property developer'. It's a bit dry but well worth a read.
My understanding of it is that if you are 'merely realising an asset' you will be up for CGT (and no GST) as opposed to it being treated as revenue for the block you sell that is not your new PPOR, but it does come back to what your intentions were when you bought the block. The other thing I understood is that the cost base for the portion that will not become your PPOR goes right back to the day you bought it so if you bought the block say 10 years ago then this needs to be taken into account as the capital gain could be significant. Again this is my interpretation so best to have a read through it.
I've always wanted to know the answer to this.
I think it has something to do with you taking a valuation of the property before demolition and construction and the CGT is on that valuation to the end valuation upon sale at completion.
So I think it's:
1. Buy PPOR for $400k
2. Value PPOR at $500k when you are ready to develop
3. CGT is from $500k not $400k
I could be totally wrong though.