Occupying half of duplex - tax implications?

Hi all,

I'm looking to buy a unit in the Inner West at the moment (2bdr for around $1.1-1.2m) to live in. I was also planning on doing some small developments on the side, but I recently had the idea of building a duplex and living in half. I couldn't afford to build the whole thing so would have to partner up with a family member who does developments and would be seeking 25-30% margin. The numbers look something like this:

Land purchase - $2m
Stamps - $100k
Build $900k
Holding Costs $200k
Total Costs $3.2m

End value would be around $3.8m based on today's values. This produces an equity gain of circa $600k which is only a 18% margin. For me this would work, as I'd be spending $1.6m to build a duplex worth $1.9m, and would be tax-free if I ever sold. However the downside is that an 18% margin isn't that juicy for my family member, given they would want to sell their side and would have to pay GST + income taxes etc. So it's a great deal for me, not so great for them.

I assume there's no way to structure it so I can partner with a family member and we could sell one half CGT-free? (noting they don't want to live in the area so them living in the other side isn't an option)

I'm thinking this could be something worth looking into in a few years though, once I had enough cash to do the whole thing myself. I'm guessing if I built a duplex, lived in half and sold the other half, I'd pay income tax on the profit for the one I sell, but no CGT if I sell the one I lived in say 5-10 years later?

Will check with Accountant before doing anything - but any ideas/suggestions would be appreciated.

Thanks

 

Yes one could be sold cgt potentially if on capital account and rules complied with.

Cgt exemption only available for main residence which means residing in property

 

Cheap build cost for $1.9m end product.... I'd get comfortable with that

 

A range of issues may impact the tax treatment as a revenue or CGT asset and also the ability to access the main residence exemption. Tax advice on all the intentions is best obtained incl GST and . Blending an intention to develop and a home may be a very poor choice and a specific tax ruling on this and recent draft property construction guidance from the ATO also contains some concerns. However its also possible the main residence exemption applies. There are some legal issues to explore also since the existing lot is a single title and a deed of partition may be needed.

My greater concern is discussing a main residence while at the same time you are calculating a margin. This suggests the whole approach can be revenue in nature. The "home" may not even be a CGT asset.