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Impact of granny flat on land tax in NSW

Discussion in 'Accounting & Tax' started by JRS, 7th Jan, 2016.

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  1. JRS

    JRS Member

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    Hi. If I build a granny flat on my ppor to live in then rent out the original home, what tax implications would this have eg. land tax In nsw?

    Thanks
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You can generally maintain the exemption on the whole property while renting a granny flat out. One granny flat.

    Not sure how you would be treated renting out the main house, but suspect the main residence exemption won't apply.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    See clause 4 in Schedule 1A of the LTMA
    LAND TAX MANAGEMENT ACT 1956 - SCHEDULE 1A

    The exemption may apply to the main residence because the definition of 'flat' is wide:

    "flat" means a room or a suite of rooms (whether or not forming part of a building or a detached building):(a) used or occupied as a separate dwelling, or(b) so constructed, designed or adapted as to be capable of being used or occupied as a separate dwelling.
    (s3)
     
  4. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    Terry is only taking about land tax NOT income tax. the property would be subject to partial CGT as it was income producing.
     
  5. JRS

    JRS Member

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    Thanks all,

    Great info, really appreciated.
     
  6. TFBoy

    TFBoy Well-Known Member

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    How would the cgt be calculated?

    Say I rent out the gf for 300pw for 5 years and sold my property for $1m with a $500k gain. Would cgt be applicable on a % of $500k or $75k derived from rent over the 5 years?
     
  7. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    You can only include more than one unit of accommodation as their 'dwelling' for the purposes of the main residence exemption if the units are used together as one place of residence or abode (Taxation Determination TD 1999/69).

    If the property consists of two or more separate units on a single title and the units are not used together as one place of residence or abode, the taxpayer cannot disregard the portion of the capital gain or loss that relates to the unit(s) that is not their main residence.

    As you are renting out part of your home, a percentage of any capital gain or capital loss will be applicable on the disposal of your home.
     
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  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    A GF is not a CGT asset.....Think about it. It is a collection of depreciable items of plant and equipment and cap allowances as such. It cannot be sold other than as a part of the main residence. Like a shed or a pool pump. You don't claim or create a CGT loss on these items either.

    The MR CGT issues has to be adjusted for the GF but the GF does not result in cap gains / losses itself.
     
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  9. TFBoy

    TFBoy Well-Known Member

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    @Paul@PFI - thank you, makes sense.

    Just a query on your last comment on MR CGT has to be adjusted? I read and heard about adjustments, however is there a formula?
     
  10. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Not as such.