CGT - PPOR with Granny flat

Hi all,

Scenario:

Property purchased for $500k: IP for 2 years with main house and granny flat tenanted.
After 2 years, we move into main house. Granny flat remains rented.
Property after 10 years is sold at $1mil

Property is has only partial exemption from CGT.
2/10 years no exemption
8/10 years partial exemption (PPOR portion vs Granny flat portion)

Questions:

1) Is a sqm portion of building size appropriate to calculate Granny flat CGT percentage.?
i.e Main residence building size 200 sqm : Granny flat 50 sqm = 25% CGT portion.

2) Where does land come into the apportionment, or does it? Because the final sale price includes land...

3) Is it appropriate to claim expenses for the property in the same portion (or at all)? i.e. 25% of rates, insurance, interest etc.

4) Is it worth while getting a valuation at yr 2 (when making PPOR), and should this include each aspect of the property land\granny flat\main house?

I will seek tax advice, however I thought this would be worth discussing due to greater uptake of granny flats recently.

 

Generally:

1. Yes the % of the GF and its land
2. its worked out on an exclusive use basis - is the GF fenced?
3. Probably for most things, but some items would be exclusively related to the GF
with CGT the whole expenses could be used to reduce CGT:
Tax Tip 86: Don’t be so fearful of generating income from the main residence
4. I don't see how this would help

 

A valuation after year two is not permitted except if the property meets s118-192 (which it does not). The CGT formula requires apportionment based upon time not changes in value as such.

 

Thanks Terry and Paul.

The granny flat is not exclusively fenced but has obvious boundaries with shared access.

If land and the building are used exclusively for the CGT portioning, then this makes a big difference in CGT as the property is on an acre.

Land: Main house accessing 3700sqm (92%) and GF accessing 300sqm (8%)
Building: Main house 200sqm (75%) and GF 50sqm (25%)

How would you calculate it from here on?
Perhaps, would you use a median figure between the land and buildings use?

 

Private ruling RBA Content | Australian Taxation Office
States:
The granny flat incorporated in the floor plan in your residence will be completely self contained and separate from the main house with no shared occupancy of living areas.� Under these circumstances apportionment of expenses should be made with reference to the floor area of the granny flat as a proportion of the total floor area of the house generally.

You may consider an alternate method of apportioning if the basis of floor space is not suitable. We do accept other basis of apportionment with regards to the reason given on case basis. Further the onus of proof is on you to show that the apportionment is fair and equitable.

 

If the GF doesn't have exclusive use of part of the land then the floor area of the building may be the appropriate way to go.

 

Floor area would be easier to justify....Thanks Terry
I liked your tax tip no. 86, Like depreciation, money is worth more now than later.
Tax Tip 86: Don’t be so fearful of generating income from the main residence