Tax on PPR Subdivision

Hi,

I am looking for some information on taxation for a subdivision of a PPR for the following 2 situations. I know I could hold onto the subdivision/new house and rent out, but am just looking at this from a subdivide/sell standpoint and how the taxation would work. And I am not looking to compare the 2 situations, just how the taxation would work for each.

Situation 1

If I am living in the house as PPR, and I subdivide to build behind while living in the house at the front, how is the tax worked out when I sell the house at the back? Do I get a valuation on the land when it is subdivided, and then add the construction cost to work out the investment cost for the profit calculation, or do we do the valuation for tax calculation when the build is finished (on the value of the house/land).

Situation 2

If I am living on the property, then I knock down the house and build 2 torrens title duplexes. I would need to live somewhere else during construction but may be able to use the 6 year rule on PPR to keep it as PPR during construction (not sure on this). Then there are two titles once the construction is finished. How does the tax calculation work and valuation for that calculation if I sell both?

Thanks
James

 

1. No main residence exemption
Pure income tax with no cgt discount apportion cost of land
Gst on sale
May be able to use margin scheme

2. Cg event triggered when move out
No 6 year rule without a house
But may be able to use 4 year rule to keep 1 as main residence but jot if you plan to sell
Gst on both

 

Technically you cannot sell a subdivided PPOR as described. Its just land. You cannot use the 6 year rule until you build the duplex, occupy it and move out. It may harm you too since the main residence exemption may not even apply in some cases and the sale may not even be a CGT matter.

My developer toolkit explores many of these and related issues and even the GST.

It endeavours to explain why advice is important

 

Hi,

Apologies for the delayed reply and thankyou to both for your feedback.

Regards
James

 

What you want to do is quite complex. Make sure you get some good advice before you begin or you may end up paying more tax than you otherwise need to.

 

Thanks for the advice. Will do.

Do you know how the GST is calculated when selling? Especially in the case of duplexes.

And it looks like when knocking down and building duplexes, there is no difference whether the previous house was PPR or not, especially if planning to only sell or rent out when finished? What are your thoughts on that.

 

Yes there is a difference when contructing. Depending on circumstances the 4 year may apply.

Think construction means new property and new property is subject to gst on first sale.

 

Depends if you keep good records
And if you are able to and choose the margin scheme