Main residence ownership period

Jan 2017 bought a very old house - left it vacant - title tenants in common A 50%+B 50%
Jan 2018 knocked it down/start building two units
Jan 2019 Entered into a Contract (the contract did not specify A or B has a right to occupy the Unit(s) at an earlier time) : Transfer Unit 1 from A+B to A; Transfer Unit 2 from A+B to B
Jan 2020 Occupancy permit issued, A moved to Unit 1; B moved to Unit 2
Dec 2020 Partition deed actioned/Title separated/Settlement occurred

My understanding is that the ownership period, for the purpose of main residence starts from the time you obtain legal ownership (unless you have a right to occupy it at an earlier time). In this case, Did the ownership period start in Jan 2020 or Dec 2020? If A wants to sell her unit as soon as possible after establishing the main residence.

 

Ownership period starts from the date of the contract as long as they move in as soon as practical. s118-135

You will have an issue because you each don't appear to have met the requirement of s118-150.

CGT will be triggered when contract entered into without the main residence exemption applying to 50% - possibly.

 

Thanks Terry... If A wants to sell the property as soon as possible, I guess it doesn't really matter if she sells it immediately after the settlement or wait for 12 months...?

 

an exemption could not apply from before moving in unless it is her main residence for at least 3 months.
But the transfer before selling will trigger CGT - but no gain possibly.

 

Yes, you are correct, A made a capital loss (early stage of the construction and the market was not good so low valuation) in the transfer. Given that an exemption could not apply, and she doesn't foresee a massive capital growth in the next 12 months, I guess she should get her accountant to work out the potential CGT based on the anticipated selling price and the new cost base, and then if she is happy with the figure, she should sell it immediately after settlement.

 

she should also consider whether this is actually on capital account. It may be revenue and there may be GST to be considered too.

 

she has only built this one under her name and she doesn't have other properties. She has previously consulted with a tax advisor, and was told is on capital account.

 

It seems like a enterprise and a isolated profit making event for A based on what is said.If B is contemplating similar this could be a real concern for both. Partitions are a taxable supply and subject to GST when made by a enterprise (In Partnership it seems). No CGT issues and no main residence exemptions. I have true doubts about the capital account view.