Valuation for CGT purposes

Discussion in 'Accounting & Tax' started by JointBuilder1, 9th Dec, 2018.

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  1. JointBuilder1

    JointBuilder1 Member

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    Hello all,

    Can someone recommend a company to do a valuation of a property in Sydney?
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Commercial, Industrial, Retail?
    Purpose? (sale, book value, insurance, reversionary interest, compulsory acquisition)?
     
  3. JointBuilder1

    JointBuilder1 Member

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    Sorry, residential.

    I am getting it to help establish a cost base for when my new townhouses are completed.

    Currently a PPOR so dont know what it's current value is.
     
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    There is not any requirement for this in tax law. A valuation can only be required when s118-192 applies (which seemingly doesnt in this example). Otherwise, if the premises are recently constructed and also on land that was part of your main residence other taxing issues need to be understood BEFORE obtaining a valuation.

    The costbase is - the COST base.
     
  5. JointBuilder1

    JointBuilder1 Member

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    As in the original price of the property for which the new development is using? When i spoke to the accountant, he said since we have been using the house and land as out PPoR, the appreciation of the capital should be able to be realized.

    eg.

    Purchased 2009 - $500k
    Market valuation 2018 before construction - $1M
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A deemed CGT event?
     
  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The accountant doesnt know what they are talking about it seems.

    The original property may have been a main residence but a CGT event does NOT occur when some of that land ceased to be used as the main residence. Not unless you are running a business and using the land as trading stock. However, that land now comprises two portions (CGT assets need not be based on a land title allotment). A valuer is the best party to apportion the original land at the date this occurred into TWO sections based on the original cost. The new section loses its past exemption (as its just land) and becomes a part of the costbase of the new section along with other build and dev costs.

    There will also be issues concerning reportable payments to consider. You may also need records prepared a specific way if you sell the new section within 5 years.

    What other stuff do they not know that you may later rely upon and underpay or overpay tax ?
     
  8. JointBuilder1

    JointBuilder1 Member

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    I am not too sure. Once i sort out a few other things, this would probably be a question for Denis.

    You may be right about the accountant. I did not have too much confidence in him thus getting a second opinion soon.

    Basically the whole property will be knocked down and amalgamated with with 3 others to make a new lot. There is a deed of partition so at the end, i will retain 25% of the townhouses (the ones i retain will be solely built on my current land with some common areas overlapping).

    My current understanding is that when i do a transfer of my title to the other co-owners to make a title with all of our names of equal share (basically transferring 75% of my property to get 25% of the total lot), it would trigger CGT.
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Denis ? Denuto ?

    No such thing as a deemed CGT event (excepting one I can think of where you can choose the event but thats not likely to apply here). CGT events are prescribed by law with respect to event, timing etc.

    Doesnt sound like a main residence concession has any impact at all to me. Other than it ceasing. And the interest in land ends and a new interest in a strata may be given as consideration (which is a taxable supply).

    But when a rollover event doesnt apply these are distinct events. The CGT event on the disposal of the land v's the new CGT asset given. The ability to backdate the main residence interest in the strata may be limited. There could be three CGT interests here.
    1. The former home / land
    2. The new enterprise amalgamating interests and making taxable supplies of new residential premises
    3. The strata interests when issued...Both main residence and investment.
     
    Last edited: 10th Dec, 2018
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    what about Section 70-30 ITAA97
    This could apply where the land was held on capital account originially and then the intention changes to that of holding for the purposes of resale.
     
  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The actions and intentions of the parties are the event. I see the issue as not one where the law deems an event but the changed intentions and actions of the parties act as the catalyst for the operative provision. ie you need a chicken before you can hatch an egg.

    Like CGT event K4 which you refer to (s104-220)

    I do know what you mean :)
     

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