main residence and GST - tenants in common

Lisa bought a property will her brother Tom in 2017 - tenants in common 50% each.
They left the property vacant from purchase until 2018 when the old house was demolished.
They constructed two units, Tom moved into Unit 1, Lisa moved into unit 2 in Jan 2019 when the construction was complete. Both units are under one title. (Their original intention was to use the properties either as main residence or as rental investment)

In Jan 2020, 12 months after they moved in, the titles were separated. Lisa now owns 50% of Unit 1 and 50% of Unit 2, and she continues to live in Unit 2, the same with Tom.

If Tom continues to live in Unit 1, and Lisa decides to sell Unit 2 now,
Can Lisa claim half of the main residence of U2?
Is there GST issue for Tom on U2 (GST 5 year rule on new property?)
or other tax implications need to be considered?

 

sounds like they didn't move in as soon as practical
Lisa might be able to claim part CGT exemption.

Could be GST if registered or required to be registered and conducting an enterprise.

This might not be on capital account either.

Heaps of tax issues to consider. Expect to pay a few thousand dollars in advice.

 

Should they have bought using a deed of partition? Upon subdivision they would own 100% of their own unit each?

 

yes

 

The 4 year construction "backdating" rule doesnt apply in this case. There initial period would be subject to pro-rata CGT based on dates. Perhaps
Neither taxpayer would have a full main residence exemption as such as they can only be exempt for their interest IF it is also their main residence. So each would have a 50% exemption

This assumes neither had initial intentions to sell but their plan was to construct their own homes. Since selling is mentioned a range of tax issues occur. eg Is it a CGT asset ? GST, How profit may be taxed etc. (TD 92/135 is a tax ruling to read)

An initial opinion may assist to determine the depth of the tax issues and wont be too costly. It could expand of course.