CGT Implications Question

Discussion in 'Accounting & Tax' started by GreenTreeFrog, 24th Nov, 2017.

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  1. GreenTreeFrog

    GreenTreeFrog Well-Known Member

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    If one person owns a property that is their PPOR, and that parcel of land has been rezoned into several zones... if you carve it up into the zones to sell, are there CGT implications on the sale of each parcel? Or the remaining parcel?

    Yes I am speaking to a property lawyer about this on Monday. :) And the ATO.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes. Main residence exemption cannot apply to vacant land. Cgt or income tax will apply. Don't forget gst
     
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  3. Mike A

    Mike A Well-Known Member

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    There certainly are implications.

    If you sell the entire lot may be CGT free. If you carve it up and sell each block seperate there will be CGT on sale.

    Also make sure you dont go building or doing major works on those blocks or you move things from CGT account to revenue account.
     
  4. GreenTreeFrog

    GreenTreeFrog Well-Known Member

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    OK thank you, that is quite clear.

    And CG is calculated by difference between sale and sell price, and divide by 2 if owned for more than 12 months? Then add that amount to tax return on top of income to determine overall tax payable as a whole?
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Sort of. You have to work out the cost base
     
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  6. Paul@PAS

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

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    Start with tax advice. Many issues. GST is one. Apportioning and other matters. It could be a CGT or revenue issue.

    The land size and its intent and use and so many other issues could impact.

    I dobt understand why the ato are a contact. They arent tax advisers and wont guide you but may answer your questions. Your questions may be wrong

    Its kinda like asking a cop who charges you how to front a defence in court
     
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  7. Paul@PAS

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

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    Not at all. Margin scheme ? Apportionment and cost may have GST...This affects cost s and tax.

    I wouldnt assume CGT until advised
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    And get some advice on strategies. I can think of at least 4 strategies that would reduce or eliminate cgt depending on what you want to do. Paul taught me one and Michael tougher me another.
     
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  9. Paul@PAS

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

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    Show and tell...What did I say.. Mike say ?

    I think mine was DONT demo and dont refence etc. Do as little as possible so the MRE (main residence exemption) applies to whole lot up to 2HA. Sell it as a residence with a DA. No GST, CGT applies, maybe exempt. Better to adjust sale price for demo costs than do it yourself.
     
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  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    One strategy is to get value up as high as possible and sell to a related entity to do the development. Another is to reset the cost base just before the splitting. Another is to use the adjoining property exemption. heaps more.
     
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  11. Paul@PAS

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

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    Yeah but the duty needs to be weighed up. For a duplex site hardly worthwhile but 20 lots to a company etc. Yes.

    I sometimes forget to actually say the key issue is early advice so all options to minimise costs and taxes can be planned.
     
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  12. GreenTreeFrog

    GreenTreeFrog Well-Known Member

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    Excellent advice thank you and none of which I had thought of or would even know these questions to ask...

    Thank you so much.

    So where do I find the people to advise me on what questions to ask and the best strategy for my situation?

    I am at the very very beginning of this process.
     
  13. GreenTreeFrog

    GreenTreeFrog Well-Known Member

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    I have spoken to the ATO many times about how to calculate CG on a property I previously sold and other tax issues. I figured if I have their advice on aboard, they can't fine me for getting it wrong! :D
     
  14. Mike A

    Mike A Well-Known Member

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    ATO are not there to provide tax planning strategies. They are pro revenue as they are a government organisation.
     
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  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    They can fine you for getting it wrong, you cannot rely on anything they tell you unless a private binding ruling
     
  16. GreenTreeFrog

    GreenTreeFrog Well-Known Member

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    I understand that. I have almost gone down that road before.
     
  17. Mike A

    Mike A Well-Known Member

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    Even a private binding ruling might be useless like many found out with the petroulias case
     
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  18. Paul@PAS

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

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    And also staffed by public servants with no tax knowledge whatsoever other than training in their respective functions and specialities. ATO staff are generally prohibited from being registered tax practitioners as they consider their skills and experience arent sufficient to become a tax agent. !! That has to indicate something.

    And their reply is only as sound as the lack of information provided by the caller.