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CGT on vacant land

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Hello,

 

I've call the ATO phone line many times but rather than put me in a queue to speak to an operator it plays a message about ATO experiencing peak time then hang up on me at the end of message. I'm hoping someone in this community can give me some advice in relations to CGT on vacant land.

 

I own a property which has been demolished and became a vacant land for over 3 years. The property was my primary residential property and I live in there for about 3 years before demolishing it. The property was never rented/no investment income. Now I want to transfer 50% of the land to my parents as gift, no money and no contract exchange hand. Our intention is to build new house on each land. Is CGT applicable in my situation? How do I work out the applicable amount of CGT? What costs should be consider in the calculation of CGT?

 

Thanking you in advance for any advice you can share with me.

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TaxTime Support

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Hi @Anna00

 

A warm welcome to our community and great to see your first post.

 

Firstly apologies on our phone queues,not the greatest experience when the queues are busy. Sometimes calling early or late in the day can be helpful to get through when that occurs.

 

Now to your query. There are many variables to your question so I have endeavoured to provide links back to our website that provide more detail. Ultimately you may wish to consult a Financial Adviser to see how they may direct you approach this taking all the various rules around CGT into consideration. However to a large part this will all be influenced on the potential capital gain obligation if any generated and that will be influenced by your choices hence why I mention Financial Advice.

 

Subdividing land in itself will not generate a CGT event. Changing the legal entity will however on vacant land as it will lose its Main Residence exemption. See Subdivision of land

 

Genuine gifting of money generally will not incur a tax obligation however property can be different depending on whether you are covered under a Main Residence exemption. See Transferring real estate to family or friends  Additionally when a House is voluntarily destroyed/demolished the rules state: If the customer demolishes an existing dwelling but does not build a replacement dwelling on the land, they are not entitled to apply the main residence exemption to disregard any capital gain or loss made on the disposal of the land. See CGT Guide 2019 page 8/302. Generally Building or renovating your home on the website states: Vacant land can be treated as your main residence for up to four years before the dwelling becomes your main residence if certain rules are met. As for calculating CGT  See Working out your capital gain or loss.

 

Hopefully this will give you guidance as to what your asking.

Kind regards

MarkA
 

 

 

1 REPLY 1

Best answer

TaxTime Support

Replies 0

Hi @Anna00

 

A warm welcome to our community and great to see your first post.

 

Firstly apologies on our phone queues,not the greatest experience when the queues are busy. Sometimes calling early or late in the day can be helpful to get through when that occurs.

 

Now to your query. There are many variables to your question so I have endeavoured to provide links back to our website that provide more detail. Ultimately you may wish to consult a Financial Adviser to see how they may direct you approach this taking all the various rules around CGT into consideration. However to a large part this will all be influenced on the potential capital gain obligation if any generated and that will be influenced by your choices hence why I mention Financial Advice.

 

Subdividing land in itself will not generate a CGT event. Changing the legal entity will however on vacant land as it will lose its Main Residence exemption. See Subdivision of land

 

Genuine gifting of money generally will not incur a tax obligation however property can be different depending on whether you are covered under a Main Residence exemption. See Transferring real estate to family or friends  Additionally when a House is voluntarily destroyed/demolished the rules state: If the customer demolishes an existing dwelling but does not build a replacement dwelling on the land, they are not entitled to apply the main residence exemption to disregard any capital gain or loss made on the disposal of the land. See CGT Guide 2019 page 8/302. Generally Building or renovating your home on the website states: Vacant land can be treated as your main residence for up to four years before the dwelling becomes your main residence if certain rules are met. As for calculating CGT  See Working out your capital gain or loss.

 

Hopefully this will give you guidance as to what your asking.

Kind regards

MarkA
 

 

 

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