Is there CGT/GST when subdividing at living in new house

Hi,

I couldn't find my scenario in any examples so thought I would ask.

I have been living in a house for around 3 years and we are subdividing the land creating one extra lot. We were thinking of building a new house on the new subdivided land and when its almost finished sell the old house we are living in and just before final settlement move into the new house and live there ongoing.

My understanding is the selling of the old house is not taxed as its our primary residence and we are not selling the new place so there shouldn't be any CGT etc but just wanted to confirm.

Thanks

 

Subdivision doesn't trigger CGT, but the sale will be a CGT event.
Get some advice

 

We did exactly this but we created two extra lots. From the tax point of view it was extremely complicated and in the end our accountant decided to obtain a private ruling on it.

I also remember seeing a similar scenario where to create the extra lot the owner demolished part of his house and removed the swimming pool. As it was his PPR he took a loss on the house when he sold it which he couldn't offset against the profit he made selling the block. After taking GST in account and the councils infrastructure charges he made a loss.

You really need to get some professional tax advice before proceeding.

 

The nature of why thGST laws will consider if there is a enterprise AND if a supply will occur. Subdivision isnt a supply but what you do with it could later be. There are many tax issues to consider and our developer toolkit attempts to explain the key issues so that specific personal advice can be given.

Moving from one to the other will mean the new home is NOT eligible for a 100% exemption and if it is sold there could even be future GST issues. The "new" land is carved out as if it was never a part of the former home and will have a costbase that is a % of the original cost and then there will be the new dwelling. These create two CGT assets. The 4 year "backdate" rule wont be able to be used to allow all the new dwelling to be exempt. Selling the new home will have a gst issue too. Residing there for a continued period will be required. Selling too soon may mean GST applies and tax credits on the build have expired.