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Is CGT payable in this situation?

Discussion in 'Accounting & Tax' started by Van-o, 2nd Apr, 2016.

  1. Van-o

    Van-o Member

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    Location:
    Melbourne
    subdividing and building duplex on mum's PPOR.

    If we were to purchase 50% of mum's property with original house still intact, would this be a CGT event? But it would require stamp duty payable?

    we would then enter into a deed of partition 50:50 with mum as tenants in common. Knock down the house, build duplex and subdivide as torrens title so mum has her own property independently.

    As I understand this subdivision would not be CGT or stamp duty event. Is this true?

    We need to get this right as it would be costly if we don't. I originally spoke to our accountant with a different scenario : knock down the house, subdivide , mum sells us half then we finance building the duplex . He said there would be no CGT payable in this instance but I really doubt this as once the house is gone and the land is subdivided the PPOR exemption is no longer there and all the reading I have done says it would be a CGT event.

    Please correct me if I've got any terminology or understandings incorrect. Total newbie .
     
  2. Marg4000

    Marg4000 Well-Known Member

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    You need accountant advice on this specific scenario.

    If mum on Centrelink (or plans to be) then this aspect needs consideration as well.
    Marg
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You need legal advice on this sort of thing.

    Disposal would be a CGT event but the main residence exemption may apply. Stamp duty would apply.

    If you set up a deed of partition at the transfer of mum's share you may avoid additional CGT and stamp duty when titles are transferred.

    Yes if you sell with the house knocked down the CGT exemption will be lost.
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Loads of issues here incl CGT, GST (a partition is a taxable supply) as well as Centrelink

    If you sell with house knocked down there may be GST issues as well as a CGT tax issue. Subdivision isnt a tax concern but a change of owner is.The main residence exemption may well end when mum ceases to occupy. Therafter there is a tax issue ad careful planning may minimise it.
     
  5. Van-o

    Van-o Member

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    Thanks for your replies and advice.
    How do we ensure we are getting the right advice from our accountant?
    How do we choose a lawyer ? What should we be looking for ?
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Good question. You want someone who is VERY property savvy (CGT, GST, income tax and duties etc) who knows the answers so its straightfwd. I would rec Terry for legal advice. We have worked on mutual client matters at times. He also knows finance and structure issues and that can be helpful to avoid advice that does not work for a lender.
     
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