When does a PPOR lose its' CGT exemption

PPORs are generally exempt from CGT upon sale. However, what happens when the PPOR becomes a development project? What situations would a PPOR then lose this exemption assuming the property is in QLD and the owners live onsite during development? How would CGT be treated in each of these situations (tried to cover all the different possible combinations of doing a development)?

1. PPOR is sold as is - Full CGT exemption
   
2. PPOR is extensively renovated, talking massive increase to footprint, then sold
3. Approval is gained to build units out the back. The PPOR is sold as is with DA approval
   
4. DA is taken through to completion with the block of units built out back and everything sold off
5. PPOR is subdivided, house demolished and both lots sold

 

Development generally means a profit making scheme and the main residence exemption would not apply. if the land is already owned it could be a deemed disposal and CGT trigger when you go from holding it on capital account to revenue account.

 

Sometimes the issue is when the property is no longer your main residence and when it becomes a development site that you fall asleep in.

It is a question of fact and needs to be looked at for each case.

 

Thanks for the replies. What determines if it is a capital account or a revenue account? What 'facts' would have to be considered? What if you are just trying to achieve it's highest and best use?

 

You will have to go and read some case law. Have a look at the tax tip I wrote on this topic where I considered one case.

 

My developer toolkit attached explains some of the complex issues that surround property used to produce income.

Personal advice is a must here to consider strategies that assist to produce more profit and reduce tax, which reduces profit dollar for dollar.

An extensive renovation wont be fully eligible for a CGT discount. It could even be held that this is part of a profit making enterprise like the other options (except #1). There could even be a loss of the main residence exemption at some point.

Also consider that if you build additional units on your main residence land a portion loses its exemption retrospectively. This can result in more tax than selling with a DA and continued occupancy. The latter option can also mean the sale doesnt involve GST.