Building on Pre-CGT land

Discussion in 'Accounting & Tax' started by Paul@PAS, 21st Jul, 2017.

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  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
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    Location:
    Sydney
    I'm often meeting taxpayers who seek to build a property (or substantially renovate one) and then later commence to live in it. They ask how the main residence exemption works if they dont commence living there until its complete. We all read here about how you must first live it after all.

    The simple answer is that provided they occupy the property after completion and live in it for at least three months then the main residence exemption backdates to the land from the time construction commenced on the land PROVIDED during that same time period they dont treat another property as their (ie family) exempt residence.

    Seems simple ?

    Well the ATO have finally clarified what happens when the taxpayer/s build on PRE-CGT land. This complicates matters as there are then two assets - A pre-CGT holding of land and a post-CGT house. Can we backdate ?

    In TD 2017/13 that ATO have clarified that the building, repairing or renovating rules is CRITICAL to claiming the backdated CGT main residence exemption.

    So basic rule is this. If you have pre-CGT land and want to build and later occupy it then ensure the three month minimum period is satisfied and then the exemption may apply from the commencement of construction all the way through.

    Take note too that profit making intenentions are excluded from this scenario. Where taxpayers eeks to profit and builds a property and merely occupies it for three months the CGT main residence exemption may not apply since its not a CGT asset.
     
  2. Hamish Blair

    Hamish Blair Well-Known Member

    Joined:
    29th Sep, 2015
    Posts:
    489
    Location:
    Melbourne
    I would like to buy a pre-CGT PPOR myself….;)
     
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