How CGT works - am i getting this right ?

Hi Guys

I am a first time builder / property investor and hope you can provide some advice on my tax situation and possible structuring

We loved where we have been living for 14 years but the property was getting too big for us so we demolished PPoR and are currently constructing a duplex.

Plans were to return and live in one and then lease the other, selling in a few years ( ie at least after 1 year to gain 50% discount) but hopefully hold for longer if we could afford to

However the pain with the neighbours in getting DA approved and managing their complaints has soured the relationship and we are now contemplating moving back in to one of the completed units and staying for min 3 months then selling (as PPoR) and holding other unit as IP. ( perhaps sell IP after min 12 months depending on financials at the time)

Rough numbers are Purchase cottage $570,000 in 2004 (cost base each unit $285,000)

Demo $45,000 (2 x 22500)

construction cost 1,200,000 ( 2 x 600)

my funds $300,000

borrowings $1,000,000.

Value on completion each $1,300,000 ( but who know what it will be worth end of 2019 ?)

If i sell the PPoR after 6 months of occupation for $1.3m should i pay down percentage of loan or leave as full amount ?

If i sell investment after say 18 months would CGT roughly be calculated as

cost base $285k (1/2 historic building cost)+22,500 (1/2 demo)+ 600K (1/2 build) = $907,000.

Proceeds from sale at $1.3M minus cost base = $400k capital gain x 50% discount (if held more than 12months) = $200K split between wife and I at $100K each so approx $50,000 tax bill each.

is there a better way to minimise tax ?

Would I also get depreciation allowance and negative gearing on investment portion while held ?

Any advice or tips would be greatly appreciated

Dave

 

There are many issues that you need to consider. Many of which are described in our developer toolkit. It provides a good basis for understanding so you can then seek personal tax advice based on your specific issues.

 

Beware of GST too. Are you registered for GST? Please get tax advice from an accountant qualified in developments.