Partition CGT date

Discussion in 'Accounting & Tax' started by zaobaowang, 1st Aug, 2019.

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  1. zaobaowang

    zaobaowang Well-Known Member

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    For dual property development or land partition, does CGT event occur on the date of signing Contract of transfer (because of partition) or on the date the partition actually takes place?
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Is it going from capital to revenue account?
     
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  3. zaobaowang

    zaobaowang Well-Known Member

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    Capital
     
  4. Mike A

    Mike A Well-Known Member

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    How is a land development on capital account ? It may be but not sure of your situation.
     
    Last edited: 1st Aug, 2019
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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    So what CGT event are you talking about? Sale?
     
  6. Mike A

    Mike A Well-Known Member

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    If the co-owners enter into a deed whereby they acknowledge that the land is to be held on bare trust for the benefit of each other in accordance with the proposed plan of subdivision each co-owner will hold their interest in the other co-owners post-partition lot on bare trust for that other co-owner. This may lead to a different result
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I think I get it now. You are holding land and then partitioning mid stream.
    Transfer of land is not a contract so the CGT would likely be on the date of the transfer. If entering a deed of partition this may be different.

    You need some legal advice, and possibly a private ruling. If developing it won't be on capital account usually.
     
  8. zaobaowang

    zaobaowang Well-Known Member

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    Apologies didn't make it clear. 2 brothers are building two houses to use as their main residences on one land. Jointly owned. The cgt event is to transfer 50% to each other. So wondering when does CGT event occurr for the transfer?
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Is there a deed, contract or just the transfer?
     
  10. zaobaowang

    zaobaowang Well-Known Member

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    No deed creared. Construction commenced and decided to go through partition. There are two contracts of transfer 50% from joint owners to one owner. The contract prices are based professional valuations.
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Did you get advice?
    CGT event A1 probably so date of contracts is the likely trigger point.
    Tax Tip 214: At what date is CGT Triggered? Part 1 Tax Tip 214: At what date is CGT Triggered? Part 1

    Probably no main residence exemption available
    Received advice on the stamp duty and GST aspects?
    Also deductibility of interest, now or in the future needs to be carefully considered
     
  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Gst on a partition occusrs with a supply. Cash or accrual? CGT events IF applicable can also be different.