CGT on main residence and Granny flat

Say I build a GF on my PPOR( which I been living for 3 years) and rent it out for 1 year.
I want to sell my PPOR after 1 year which has the GF.

Example,

PPOR purchase value - 500k
PPOR current value - 700
PPOR value after GF addition - 900k
PPOR sale value is 900k

Do I still get the CGT exemption for my PPOR with GF?

 

No

 

Thanks Terry.

So I dont get exemption even for upto 750k( say the granny flat build cost is 150k)?

 

Granny flat is income producing so CGT will apply to the sale

You then need to work out the cost base

 

Sorry Terry what does the cost base means? CGT on the build cost of the granny flat?

 

Tax Tip 76: Calculating the Cost Base for CGT purposes Tax Tip 76: Calculating the Cost Base for CGT purposes.

 

Awesome thanks a lot Terry. Very helpful as usual.

 

Technically speaking a GF is NOT a CGT asset. Instead its an item of plant & equipment and typically means an adjustment in the CGT calcs. You can think of it like a pergola, garage or pool shed in a rental property. I have never seen it but I would think a separate sale of a GF is quite rare. Any gain or loss may be a revenue issue subject to balancing adjustment - IF a profit occurred would be rare for a CGT gain to occur.

Its like a bus company selling a bus. The profit isnt a CGT gain. Its revenue. Even if the business is being sold. It will still have a tax consequence. Maybe not a CGT consequence.

The CGT impact for the land adjacent to the GF may impact CGT exemptions etc. eg If the home was a main residence then a % of the land may be subject to CGT based on area and time apportionment.

 

It may be though, depending on the amount spent on it. Which will further complicate the calculation, and obviously advice would be needed.
Capital improvements and separate assets

 

I did say very rare. Its rare to find a GF that meets the test of a CGT asset and which is also capable of separate sale (its probably not a GF I argue. I have yet to see one) in which case a balancing adjustment occurs anyway. Its not an "improvement" either if its a stand alone dwelling separate to the main residence dwelling. Instead the depreciated assets rule applies.....

Assets subject to a balancing adjustment
A building, structure or other capital improvement on land that you acquired on or after 20 September 1985 is a separate CGT asset, not part of the land, if a balancing adjustment provision applies to it. For example, a timber mill building is subject to a balancing adjustment if it is sold or destroyed, so it is treated as a separate asset from the land it is on.

This has the effect of a revenue nature for the balancing adjustment. Then the WDV for the structure (QS report?) merely affects the proceeds attributable to the land for the CGT apportionment. Given you cant sell the GF and its land separate to the adjoining main residence on the same title, what CGT calc for the "GF itself" is needed ? Its like apportioning a CGT issue for any other property sale where there are depreciable items.

 

Thanks for your inputs Paul. Appreciate it