We purchased a property approximately 10 years ago and we have always lived in it from date of purchase. The house on the property is from the 1950's era and we are looking to rebuild. The block of land is large at over 1300square metres and although we didn't consider it when we purchased, the amount of work to maintain the gardens is significant. We looked into the possibility of subdividing the land and it does appear to meet the requirements from our local council. We are concerned if we subdivided the block and sold off one block that we would have no control on what the new purchasers built which would potentially negatively affect our lifestyle. We are making enquiries as to subdividing the block and building two new homes. If we moved into one, and I understand it must be for a minimum of 3 months, and then sold it, I understand this would give us the Principal Home tax exemption. If we then moved into the other new house, and stayed there for ?? (forever home) what would be the tax implications? If the original purchase price of the land was $900,000 and we split the entire land 50/50 that would put the value of the subdivided block at $450,000. Would we pay tax on the difference between $450,000 and the new valuation? If we stayed in the second house for 5,6 or say 10 years and then sold what would the tax implications look like? Also when would the tax implications on the second property be payable, when we move in or down the track when sold?
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Hi @Jaymon
Focussing on your new builds -
If you moved into one of your new homes and lived in it as your main residence, you can possibly treat it as such for that period when you eventually sell. If you sold within 5 years, you'd have to consider any GST implications because it's a new residential property.
If you moved into the other new home, you can't treat it as your main residence for the period the other one was unless your situation fits into moving to a new main residence. You'll need to work out CGT when you sell, and again if it's within 5 years you'd have to consider GST.
You'd pay CGT on the difference between what your cost base is for your land (450,000) and what your proceeds you sell it for. You'd also need to value the house, the cost to build would make up part of your cost base for it. Have a look at the examples about Subdividing land.
Because this is a complex arrangement, I recommend getting tailored technical assistance from us once you decide what you'd like to do, then we can make sure we've covered everything.
All replies
Hi @Jaymon
Focussing on your new builds -
If you moved into one of your new homes and lived in it as your main residence, you can possibly treat it as such for that period when you eventually sell. If you sold within 5 years, you'd have to consider any GST implications because it's a new residential property.
If you moved into the other new home, you can't treat it as your main residence for the period the other one was unless your situation fits into moving to a new main residence. You'll need to work out CGT when you sell, and again if it's within 5 years you'd have to consider GST.
You'd pay CGT on the difference between what your cost base is for your land (450,000) and what your proceeds you sell it for. You'd also need to value the house, the cost to build would make up part of your cost base for it. Have a look at the examples about Subdividing land.
Because this is a complex arrangement, I recommend getting tailored technical assistance from us once you decide what you'd like to do, then we can make sure we've covered everything.
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