Capital Gains Tax for subdivided PPR

Hi All,

Hoping I could get some advice for capital gains for a subdivided PPR. Basically a few years ago the wife and I purchased a house, moved in and lived in it for a few years. Over the years the house became too run down and was too small for us. We decided to demolished, subdivide and build a duplex.

The build is now complete and we have since moved back and have been living in one of them for a few months. My question is how long do we need to live in it before we can sell and not be liable for CGT? As its our PPR my understanding is there will be no CGT. Is there anything I need to be made aware of before going ahead? I have spoken to a few accountants and I keep getting different answers.

We initially planned on living in one duplex and renting out the other, however I have since been made redundant and can no longer afford to keep both, we plan to move into the other duplex, which have never been rented out. Will there be any issues with this?

Thanks in advance.

 

assuming held on capital account you would need to live in one for 3 months to get the main residence exemption. But this can only apply for one of them. The second will be subject to CGT.

 

ATO website states that there is no minimum length to make a house you PPR.

• the length of time you live there – there is no minimum time a person has to live in a home before it is considered to be their main residence

Some agents say 3months some say 6months, some say 12months.

Why would the second be subject to CGT, if we moved in and made it our PPR too? it would never have produced any income and would not have been rented?

 

Your looking at the wrong thing - barking up the wrong tree

In this situation the house is demolished so different rules apply.

View the actual law at s 118-150 ITAA97
INCOME TAX ASSESSMENT ACT 1997 - SECT 118.150 If you build, repair or renovate a dwelling

 

because you can only have one main residence

 

Thanks for the advice Terry, really appreciate it. Not trying to be a smartass or anything but your saying is, if i live in one duplex for 3 months, sell it, pay no CGT on the sale. I then move into next door, make it my PPR, live in it for say 5yrs and when I go to sell it I will pay CGT on the sale of the second duplex even tho its my PPR?

 

Yes, thats probably (I don't know the full details) right Zach. But you will be able to claim a partial main residence exemption on the second property

see
Tax Tip 43: Demolishing PPOR and Subdividing land and building 2 houses Tax Tip 43: Demolishing PPOR and Subdividing land and building 2 houses

 

Wondering what was the outcome of this?

 

I would get personal tax advice from a tax adviser who knows property well. You may fall foul of a tax ruling that denies you the main residence exemption AND may find none of the sale is subject to CGT and even may be subject to GST.

Remember OLD tax law didnt include CGT. If your intention was producing a profitable outcome then full tax could apply.

The idea of leapfrogging properties is a automatic concern for these issues. Looks and smells like a isolated profit making enterprise.