Subdivision - backyard of PPRO

Hypothetical scenario, and I know it can be complex and require specific advice, so I will keep it generic.

You buy a PPOR with a big backyard that can be subdivided. Move in and wait a year to subdivide the backyard
- You sell the backyard empty - no GST since it's not an enterprise (?). CGT discount if you have held the PPOR for a year, or do you need to hold the subdivided land for a year?
- You build and sell the house in the back - GST is payable I think
- You build and rent out the 2nd house - for how long do you need to hold before GST is no longer an issue?
- You move to the new house and sell the front house - CGT discount because you held it for a year

Any other scenario that may be preferable? I also appreciate it depends on goals - in my case I would have to sell at least one of the two houses / blocks 2-3 years after purchasing.

 

It will all depend. It could be an enterprise and it could be taxed on revent account.

A house is 'new' for up to 5 years for GST purposes.

 

The simple answer suprises many.

When you subdivide a main residence the subdivided portion is treated as if it NEVER was an exempt asset and is fully subject to tax. GST also may apply to sale.

I would get personal tax advice. There is far more to the issue and its well explained in our develoepr toolkit

You sell the backyard empty - no GST since it's not an enterprise (?). WRONG. Sale of vacant land is a taxble supply. Actiosn to develop and subdivisde a likley enterprise even if it is a one off. If sale of land occurs as a mere realisation event maybe no GST. eg older couple find yard unmanageable. But soon after purchase itsnt likely.
CGT discount if you have held the PPOR for a year, or do you need to hold the subdivided land for a year? WRONG - It could be an isolated profit making event and not even be a CGT event.

- You build and sell the house in the back - GST is payable I think. Likely but not always. But a new build being sold almost certainly will involve GST.
- You build and rent out the 2nd house - for how long do you need to hold before GST is no longer an issue? So you build to sell fror profit ? Definately GST and no CGT discount. The use of the property may need to expire past the "new residential premises" period. Depends if that is met. eg continually ONLY rented 5 years. But GST on build is lost. And use of the margin scheme could have applied but was missed.
- You move to the new house and sell the front house - CGT discount because you held it for a year. No. Read TD 92/135 which says neither dwelling is a main residence.

 

If you have a pre-CGT main residence then add a dwelling onto the main residence property after CGT was introduced (not subdivided but becomes a dual occupancy property), then you lease out the new dwelling for a period of time, what happens when you go to sell the whole property? Is it all still considered a pre-CGT property and/or main residence?

 

short answer is no

 

I should have been clearer

This is why the general view is seek personal tax advice as your circumstances may vary from that of others

Using part of you home as a bed and breakfast or adding a GF etc may mean a portion of your home isnt USED as a main residence. Even partitioning off part of the home to create a portion not used as part of the main residence has a same effect. Even if its for one day, one room etc it has a affect on how CGT is calculated.