Subdivision-when does ATO see the land as separate entities?

Can somebody assist me with advise please?
If I have IP rented and build new unit on half the block, rent out new IP then subdivision paperwork is finalised 18 mths later, at which point is the land deemed to be subdivided for the purpose of interest apportionment between the 2 properties? All payments have come out of LOC including original purchase.

 

SNAP. I have the same question, except that I have moved into one of the dwellings as our PPOR. I hope to transfer ownership from my name to my wife without incurring stamp duty (which is still possible in Victoria, and hopefully remains so, at least for PPOR).

If separate title is not recognised by the ATO until subdivision occurs, then I presume the 6 year clock starts ticking then? And I should bide my time before transferring title to my wife?

Also I understand the cost base is at market value on the day of transfer rather than historical cost. Please advise if I have misunderstood this.

 

At the time when the separate parcel of land is held as separate from the rental producing use. Its use changes. For income tax we are generally concerned with land use. ie when it is fenced and / or not USED as a part of the rental producing portion. If done correctly the land can be on two titles and still all be part of the rental property. But when it then is listed for sale etc then a new asset may now be split. It can vary. However no CGT event arises at that point - Perhaps. But a CGT costbase apportionment occurs so that two different CGT assets exist.

But if you intend to sell off the vacant land a CGT event can occur...Tax advice may be required.

This just means the costs for the vacant land must be apportioned and allocated for a different purpose for the balance. A property valuation would be needed to split the costbase of the rental into the two elements (ie house and land + new land). Holding costs for the new land would be treated differently to the rental producing portion.

Hamish's question is far more complex. It is also possible that a former main residence is no longer a main residence if the use changes. Personal tax advice is needed.

Also in both instances there are issues surrounding GST that are likely involved. It is always sensible to get personal tax advice to avoid significant penalties

 

I agree with paul For. apportionment it doesn't really matter as it is the use. They could still be on the same titles with interest apportioned.

 

Thanks Paul and Terry for your responses.
The unit was completed, the fence went up then rented out, the official subdivision from Lands Dept came later. So wasn't sure if apportioning land cost was from when it was rented, or as you said Paul the fence went up or when council started charging as separate entity.

 

So it seems the date isn't set by some exact rule but more so when it became income producing or separated from the original lot by a fence?

 

Essentially both lots are rented out and held by the same owners so not a great deal changes. It's just a matter of when the split is triggered.

 

In the example given I would think the new land asset commenced from the date when construction commenced or when the land commenced to be fenced off for the build (whichever occurs first). The temporary builders fence means its not a part of the rental property used by the occupants from that time.

That date will be relevant for a valuation split of the original costbase into the two elements. One being property + land and other is vacant land. Then add the build etc costs to the new land.

The interest on the new and portion may still be deductible BUT not under rental expenses section until such time that it completed and is available for rent.

 

Thanks Paul that makes sense.