Duplex strata titling & CGT

Hi All,

I have duplex in QLD under construction and want to strata title them once they are built. My concern is what date should be considered for the CGT event and what would be the purchase price for individual units?

 

Lets say I have purchased the duplex for $600k on 01 Jun 2015. I managed to strata title duplex in 01/08/2016. If I want to sell the unit 1 for $330k what would be the original purchase price for unit 1? Should I receive CGT discount as I have kept the income producing asset for more than 1 year or? Or should I consider the day it has new titled?

 

Strata titling doesn't trigger a CGT event. Generally the date of the land contract will be the relevant date, but sometimes the land and the building can be treated as different CGT assets.

 

What would be the purchase price for unit 1 ? How would you calculate CGT if Unit 1 sold at $330k?

 

You would have to get a valuer in and apportion the values between the two.

This may be relevant Tax Tip 43: Demolishing PPOR and Subdividing land and building 2 houses

 

Im always amazed by the number of peeps who ask serious CGT q's well after spending a million $. You wouldnt earn $1m and then accept that the employer doesnt comply with tax laws.

Without CGT records the cost base could be zero and serious tax consequances arise. In such cases you will overpay CGT in 100% of examples. What is your GST position sincenew residentil may be subject to GST. If you buy the duplex its unlikely to be subject to GST but why are you selling ? There may be a tax issue but no CGT issue

 

Thanks Paul.
I purchased the land and building the duplex which is approaching practical completion in short time. If I want to sell any of the units, then I have to strata titled them and then be able to sell one of the units. Currently they are under same title under my name only. I haven’t paid any GST and not sure why I would have to pay any GST if I will strata title them.

 

new residential property is usually subject to GST on its first sale

 

Thanks Terry, how can I get information regarding the GST for new property?

 

How long do we need to wait to avoid paying GST? Is it five years??

 

Just google. first posts will be from the ATO which has some good short articles.

More heavy going:
GST AND “ENTERPRISE” IN THE CONTEXT OF THE SUB-DIVISION AND SALE OF REAL PROPERTY

 

Property is considered 'new' on the first sale for up to 5 years after construction or major renovation.

 

The 'good' news that yes you are liable to GST on the sale if you sell any of the duplex within 5yrs but you also get to claim GST that you would have been charged by your builder etc to offset that.
Even though it is in your name this may be considered not an investment by the ATO and therefore not a CGT event but an income tax event for you.
If you want to sell both you may well be considered a developer. If you only sell one then it might go the other way.
You need some good advice from an accountant pronto.

 

Agree. GST is only triggered if you partition or sell any and if its subject to GST and within the timeframe of first 5 years. However I do see many people who build to rent and fail to keep GST records who later change their mind and fall within the web of the world of GST. So GST can still apply sometimes.

Its wise to know the rules and how they MIGHT apply so that you make sound decisions and keep the right records.