Valuation for CGT Event

We're in the process of subdividing a property with our neighbour to create 3 lots from the current 2. Our property is currently an IP, however following demolition of the existing buildings and creation of the new lot it will become a PPOR new build.
Calculating CGT on the sale of our interest (50%) of the newly created block should be fairly straight forward - apportioned cost base from the initial purchase + development costs. I believe we will need a valuation done on our retained block prior to commencing the new build in order to confirm value when it becomes our PPOR. CGT payable will be worked out from this new valuation.

Is this understanding generally correct? My main issue is ensuring I get a valuation done at the correct point in time, and that I don't somehow become liable to pay CGT on the value of the new build.
Also with regard to valuations, is a written estimate from a licensed realestate agent sufficient?

 

Is it CG? Or revenue?

 

could be both as well

 

no

 

The costbase of the former IP will be its historical cost adjusted for Div 43 and Div 40 claimed and the scrapping of the dwelling (despite it not being deductible). s118-192 which is the valuation matter doesnt apply in this case and so the costbase should be the reduced costbase. Tax advice on the matter would be wise as there could be a disposal and acquistion matter regarding the neighbour to also consider.

I dont follow how a main residence exemption applies to 50% of a newly created lot with your home on it ? Confusing. If you are disposing of some of your land then it is certainly taxable and you may need to apportion proceeds likely using area as the reasonable basis unless matters like water access etc impact the lot/s. . And potentially could involve GST although it seems likely your purpose is on capital account and not as a element of a enterprise.

 

Assuming capital account the Main Residence exemption could be lost totally.

 

As the property was a IP since acquisition and until ceasing tenancy its of no concern I believe. Yes, if the property was a former main residence then the portion of the land that is not used in the construction of a future main residence would sever its past main residence exemption. This can horrify some people. They think of exemption and we tell them its lost. Surely I'm wrong ? No. Even pre-CGT land can be affected and be partly taxable from that event onwards

The period between acquisition and disposal may also need advice. If the larger lot was acquired with intention to develop and dispose the partial disposal of land could be on revenue account and even be subject to GST. This could even extend to the site for the home in the manner outlined in TD 92/135 and it may not even commence to be a CGT exempt home. The manner of retention could refute that arguement.

Complications can also arise in apportioning holding costs such as interest etc. The same % apportionment should be consistently applied from the time the former IP ceases to be used to produce rental income. The non-deductible holding costs applying to "vacant land" will need to apportion between each part of the new land.

 

I also have a question regarding retrospective valuation of a property for CGT purposes.
House and land purchased 2008 and always rented out. As it is a corner block we built a unit on the vacant portion in 2013 which was also then tenanted. Official subdivision with lands dept happened in 2015.
Now original home and portion of land has been sold and accountant has said I need valuation to apportion the purchase price between the 2 lots.
As far as what I need to ask valuer for, is it just the value of house and Lot 1 as two separate values (or as house and Lot 1 together), and value of vacant land of Lot 2?

 

The is something you should be asking the accountant. I would think you are correct

 

The valuation should APPORTION the two portions . eg X% + Y%. These percentages can be used to apportion the historical acquisition cost (property, legals, duty etc). Valuing one and deducting the other is not an accepted method. If the valuer is given these historical costs then they could apportion the amount attributable to each portion.

 

Thank you Terry and Paul for your answers.

Got valuer onto it.