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Tax Tip 141: Strata Titling a property and CGT (Part II)

Discussion in 'Accounting & Tax' started by Terry_w, 30th Jun, 2016.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Strata Titling a property and CGT (Part II)

    Normally there is no CGT event triggered where a piece of land is subdivided into different titles – strata title Tax Tip 140: Strata Titling a property and CGT

    But this is not the case if the titles to the individual units were to be in different names to the original title of the whole block – such as 4 People buying a block of 4 units on one title and strata titling them ending up with one unit each. Each unit would be going from 4 names to 1 name so this would normally result in a CGT event happening because the ownership of each unit will be different to the ownership of the original block.

    However, where there is an agreement that tenants in common will each be entitled to exclusive occupation of a particular strata unit it may be that no CGT event will be triggered. This agreement should be in writing and ideally in the form of a deed as this will clearly show the intention of the parties (see Deeds of partition thread: Legal Tip 77: Joint Purchasers of Land and deeds of partition)

    But the ATO has allowed at least one group to avoid CGT where there was nothing but an oral agreement. See, but don’t rely on:

    PBR 93567
    Austax

    Relevant law:
    S 124-190 ITAA97
    INCOME TAX ASSESSMENT ACT 1997 - SECT 124.190 Strata title conversion
     
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  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Dangerous area without legal and tax advice. Where the parties enter into the arrangement for a HOME each then CGT events described above are involved. Where is a joint venture development then CGT events may not occur if the property is held as trading stock by a developer.