Dual Occ and Capital Gains Tax

If I have an existing plot of land that is my PPOR and intend to redevelop and build side by side townhouses. What is the amount of CGT applicable if any for the following scenarios?

Scenario 1
- Live in one, sell one. (When is the best time to sell? While building/just built? Would that mean the townhouse sold is still considered PPOR? no CGT?)

Scenario 2
- Live in one, rent other then sell the rental after a year. (How then does CGT get calculated?)

Scenario 3
- not sure if this is even possible but stay in one that is going to be sold/rented for ? required term ? 6mths, a year? Then rent/sell that and move to the other townhouse. (Would there be any CGT there?)

 

assuming CGT applies at all
1. On the sale proceeds minus the cost base
2. as above
3. nil possibly

Don't forget GST

 

Highlighted section is technically impossible. A main residence exemption (MRE) ends when you cease to occupy and / or change use of the land. And if its land it can never be a residence - I assume you mean your existing house and land is your main residence. The portion of the new build may later be eligible for a new MRE IF you promptly occupy it AND retain residency for at least three months. Obviously you cant reside in both sides of a duplex however so at best 50% of the whole property is exempt then. The other taxable.

Also consider GST, tax on profit etc

depending on issues CGT may apply but also it seems more like a isolated profit making intent so no CGT and full tax may apply. How is that calculated ?? Hmmm. Thats where it gets further complex and tax advice may assist.

The developer toolkit explains the fundamentals

 

1. GST on sale, Maybe use margin scheme to reduce GST, maybe claim 50% of GST incurred on dev. No CGT on one sold. Ordinary taxation as an isolated profit making intent. Must live in the keep. Sale of keep would trigger GST for years ahead. Assume you keep indefinitely. Eligible for MRE on your home.

2. Same as 1. but at time of sale GST still applies. GST on 50% of build to reduce GST payable may be reduced as mixed use of property to produce a profit AND rent affects entitlement to full tax credits. No CGT when sold. Isolated profit making applies to this.

3. 6 mths, a year all the way through to 5 years same issue applies. GST ends after 5 years of rental but so does the GST on the build too. Deferred sale doesnt mean its a CGT asset - Isolated profit making MAY still apply. Moving from one to the other doesnt assist any tax issues or mean tax issues end. You can only even claim one property as your main residence and there is a tax ruling that can affect the main residence exemption so care must be taken when you also seek to make profit. Assets used to make profit arent a CGT asset and so no MRE may apply.

All needs personal tax advice.

 

Thanks for the detailed response Paul.