CGT treatment of a knockdown rebuild while selling a prior primary place of residence

(Newbie)Newbie

12 Apr 2024

Hello everyone,

My wife and I have encountered some complexities regarding capital gains tax (CGT) on property sales, and we could use some guidance. Here's a timeline of our situation:

Mid-2007: My wife purchased an apartment in Singapore, where we subsequently resided after our marriage.
31 Aug 2017: A formal valuation of her Singapore apartment was conducted by a reputable valuation company.
September 2017: We relocated to Australia permanently and rented out the Singapore apartment.
June 2021: We purchased an older house in Australia with plans for a knockdown rebuild. The existing house was promptly demolished, and we continued to rent elsewhere.
June 2022: My wife sold her Singapore apartment at a higher price than its purchase value.
October 2022: The sale of the Singapore apartment was settled.
March 2023: Our new house in Australia was completed, and we moved in immediately.

We have several questions regarding CGT implications:

Can my wife claim the Singapore apartment as her primary residence to avoid CGT on the sale of that apartment?
If we were to sell our new Australian house in five years, can we claim it as our primary residence from the time of the land purchase (i.e. June 2021)?
Can we claim primary residence status on both the Singapore apartment and the new Australian house, considering my wife owned the apartment and we jointly own the house (i.e. I didn’t have a share in the Singapore apartment)?
Is it possible to utilize the six-month overlap period for moving primary residences, or is the gap too large or do we not meet the conditions since my wife rented out her apartment after moving to Australia?
Our accountant claims we can claim primary residence status on both properties to avoid CGT altogether, which we treating as suspect advice. If this is incorrect and the Australian Taxation Office (ATO) imposes CGT on the new house, can we reverse the tax treatment to apply it to the Singapore apartment? If we have to choose between the two dwellings it is more beneficial that we pay tax on the Singapore apartment instead
If we claim primary residence status on the Singapore apartment and the ATO levies CGT on the Australian house, would it only apply to the change in land value since the apartment sale occurred while the house was still under construction? How would that be determined?
If CGT is imposed on the Singapore apartment, what would be the cost base: the valuation at the time of relocation to Australia or the valuation at the time of purchasing the Australian house?

I've included relevant sections of the Income Tax Assessment Act below for reference. Any insights or advice would be greatly appreciated.

Relating to changing main residences:

http://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.140.html

Relating to building a new dwelling:

http://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.150.html

Thank you in advance for your assistance!

0 likes

467 views