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Hi, I purchased your capital gains calculator but it did not account for my situation.
I purchased an investment property and rented it 100% of the time, built a new house in the back and rented it 100% of the time, then subdivided and sold the original house in the front. I still own the house at the back.
What would be an ATO acceptable way to calculate the Base Cost Price for unit 1 and unit 2 so that I can calculate CGT? I have never had a valuation completed.
Here is a timeline of events
20/11/2010 $376,000 Purchased investment property
30/01/2011 $18,892 Purchase costs incl conveyancing and stamp duty
17/04/2012 – 12/11/2012 $28,460 Unit 1 Major renovations incl replace kitchen, carpet, painting, rewire electrical, knock down and erect new internal walls.
17/04/2012 – 12/11/2012 $185,301 Unit 2 built (new house)
19/09/2012 $526 Council Application Fee for subdivision
30/09/2013 $2,986 Landscaping works for unit 1 and 2 as required by town planning permit
15/05/2015 $1,120 remove and replace fence on 2 boundaries
01/03/2015 $1,150 Remove unit 1 overhead electrical supply
01/06/2015 $2,750 Surveying services for subdivision
03/07/2015 $1,598 Lodgement fees for subdivision
28/07/2015 SUBDIVISION REGISTERED AND COMPLETE
07/10/2015 $1,900 Unit 1 render external walls
02/03/2016 $12,621 Unit 1 Major renovations including remove/install new carpet/underlay, painting, new shower screen, new vanity & taps, new floors in wet areas
30/04/2016 $340,000.00 Unit 1 SOLD
13/07/2016 $9,550 Settlement fees and agent commission
Approximate land allocations after subdivision
Unit 1 – 43.20%
Unit 2 – 30.50%
Common – 26.30%
Council Rates valuation 01/01/2010
CIV $320,000
Site Value $280,000
Net Annual Value $16,000
Council Rates valuation made 01/01/2012
CIV $370,000
Site Value $300,000
Net Annual Value $18,500
Council Rates valuation made 01/01/2012 – amendment
Unit 1
CIV $270,000
Site Value $135,000
Net Annual Value $13,500
Unit 2
CIV $330,000
Site Value $165,000
Net Annual Value $16,500
Council Rates valuation made 01/01/2014
Unit 1
CIV $290,000
Site Value $135,000
Net Annual Value $14,500
Unit 2
CIV $350,000
Site Value $165,000
Net Annual Value $17,500
Answer
Sorry Chad, had a bit of a bottle neck and a very busy week, thanks for your patience.
The first element of the cost base for unit one is its share of the original price you paid. There is no resetting of this cost base and no need to reduce it for anything that may no longer be their such as fences that have been replace. Of course, there is a reduction for depreciation claimable but that is another issue.
So for unit 1 you need to find out what percentage of the purchase price applies to the original house and the smaller portion of land that is now associated with it. This should be done by a valuer. Possibly try to find out how much a block of vacant land, similar size, in the area cost, back when you bought the property then assume the extra you paid is the value of the house. Apportion the land on a sqm basis and add the house value to get the first element for unit 1. Note there may be an argument to apportion the land different to a sqm metre basis because one has better views etc. Either way it must all add back together to the original purchase price. Stamp duty on buying can be apportioned on the same ratio.
Costs associated with the subdivision generally related to the production of two blocks of land so they should just be split equally between the two blocks unless they specifically apply to one block ie water and sewage connection to the new house. Renovations of course go to whichever house they applied to and selling costs go to unit 1’s cost base.
The goal is to apportion the original purchase price, so council unimproved valuations have limited use. Though, if it suites you, you could use them as a basis to apportion the portion of the original purchase price that was the land instead of using a Sqm basis. They certainly seem to be telling you that Unit 2 is inherently more valuable than unit 1 despite the fact Unit 2 is on a smaller block. Note you still need to first split the original purchase price between the land and the house. All the ATO require is a reasonable method of apportionment.
