Tax Implications Question: Duplex KDR for TIC + Spouses

Hi property brains trust! First of all, happy new year.

I've tried scouring the forums for similar threads, but surprised I couldn't find a post on the same scenario.
Just looking for some acknowledgement/general feedback on our current scenario.

Scenario:
- My sister and I co-own a NSW investment property as 50:50 tenants in common (only our 2 names on the title). When we initially purchased the house in 2013, we renovated it and rented it out right away.
- Our plan is to KDR duplex ending up with two separate torrens titles - lot A in sister + spouse's name; and lot B in mine + spouse's name. I.e. one property with 2 names on title, to two separate titles with 2 new names on each title
- Once the duplex is built, our intention will be to live our properties as our PPOR for the long-term (> 6 years). Yes I know, we'll be living next to each door to each other Brady-Bunch style..

Based on hours of reading through this forum & Terry_w's tax/legal tips, my basic understanding is:
- a CGT event will be triggered. We plan to get an independent property valuation prior to demolition, and speak to a tax agent about our cost base & what our estimated CGT will be
- Stamp duty will be need to be paid. Seeing as our spouses are adding names onto each of the titles, they're essentially buying part of our property
- No GST considerations as long as we stick to our plan of living in the property long term after the build.
- Financing will be tricky as all 4 owners will need to be on the loan - will need to speak to a mortgage broker about this.

Questions:
1) Am I on the right track, have I missed any other tax considerations?
2) Are there any tax advantages/disadvantages of when we subdivide the land? e.g. Before the build versus during/after the build

Thank your consideration & time. I have a feeling after the tax implications are more clear, it may not be feasible to proceed with a duplex KDR..

 

1 you could lose part of all of the main residence exemption if you time things wrong
2. yes

 

Thank you Terry!

With regards to timing, are you referring to losing potential CGT exceptions relating to this part of the ATO website?

• "build or renovate your home on land you own – you can treat the land as your main residence for up to 4 years before you move in, provided you move in as soon as practicable after it is finished"

 

That’s part of it

 

You should go seek some legal and taxation advice as it can be complex. My gut says you would be best subdividing prior to construction and doing a deed of partition to sort out ownership. You would transfer 50% of your block to your sister and she could transfer50% of her block to you so that you each own 100% of your block. Then finance for construction is much easier.

Adding spouses could be done after the partition is carried out but perhaps before construction - the timing of this may need finessing to be ideal

I'm not an accountant so I may lead you up the garden path by poor choice of words but that is how I have done a similar KDR duplex in the past.

 

probably best to avoid making gifts. Depending on where the land it is might be better to add the spouses later rather than now but it might be best to partition before knocking the house down.

tax and legal advice needed. maybe an accountant could do some modelling if you had the scenarios mapped out. @Mike A is good at this.