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Subdividing land, building, selling and CGT

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Hi there,

My husband and I own our family home which sits on a 1200 square metre block of land. It has been our primary place of residence since I inherited it in 2008 when my father passed away. 

We are looking to knock down the old house and subdivide the property in order to assist our two adult children enter the property market. We are wondering what are the CGT implications? Are we eligible for the Principal Place of Residence exemption or the 50% discount method for calculating CGT since we have owned the property for 12+ months?

Assume we subdivide into Blocks 1, 2 & 3, each with a separate Title. (The original house that is to be demolished sits on roughly half of the land, which would be turned into Blocks 1 & 2). 

Scenario 1; We subdivide the land into three blocks, gifting the Block 3 to our daughter. We build new houses on Blocks 1 & 2 and maintain ownership of Block 2 and selling Block 1.

Scenario 2; We subdivide the land into three blocks, gifting Block 1 to our daughter. We build new houses on Blocks 2 & 3 and maintain ownership. 

Scenario 2; We subdivide the land into three blocks, gifting Block 1 to our daughter. We build new houses on Blocks 2 & 3 and maintain ownership of Block 2 and sell Block 3. 

Thanks so much for your help in understanding CGT.





 

 

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Devotee

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Subdivision of land does not trigger CGT. Transfer of ownership will require you to consider CGT. 

 

There is a question of if you sub-divided into 3. Live in property 1 as your principal place of residence (ppor), gift property 1 (the ppor) to daughter (she pays stamp duty) - no CGT to you since ppor, you move into 2 - treat that as your ppor & live happily ever after. Also assumes that prior to inheriting it, it was used as a ppor.

 

Please note that for all transfers of property, you should consider the stamp duty implications - which vary state by state.

 

The above is agnostic to whether your daughter pays for the transfer or receives it as a gift.

1 REPLY 1
Highlighted

Best answer

Devotee

Replies 0

Subdivision of land does not trigger CGT. Transfer of ownership will require you to consider CGT. 

 

There is a question of if you sub-divided into 3. Live in property 1 as your principal place of residence (ppor), gift property 1 (the ppor) to daughter (she pays stamp duty) - no CGT to you since ppor, you move into 2 - treat that as your ppor & live happily ever after. Also assumes that prior to inheriting it, it was used as a ppor.

 

Please note that for all transfers of property, you should consider the stamp duty implications - which vary state by state.

 

The above is agnostic to whether your daughter pays for the transfer or receives it as a gift.