In May 2007, we bought 2 houses side by side in a Sydney suburb as 2 separate lots. One house was purchased by myself together with my friend for $550,000.00; the other house was purchased by my brother for $550,000.00. We bought them as our first homes and we received the first home owners grant and stamp duty concessions. We live in the houses and we use them as our primary residenceS.
In May 2008 we lodged an application with the council to demolish the existing houses and build 8 townhouses. The DA consent was granted in January 2009. We have decided to sell the 2 houses with the DA to an experienced developer. We have found a purchaser and we have agreed on a price of $1,250,000.00.
OUR QUESTION IS:
DO WE HAVE TO PAY GST AND/OR CGT ON THE SALE
OF THE 2 HOUSES?
Here’s some other facts that may be relevant:
1.All 3 parties that own the 2 houses are also business partners in a fast food business, trading through a company ABC Pty Ltd.
2.The DA to build the townhouses was lodged not in our personal names, but in the name of a company XYZ Pty Ltd. The houses were never transferred to XYZ Pty Ltd, the company was simply used as the vehicle to obtain the DA. XYZ Pty Ltd is registered for GST and some input tax credits have already been claimed, eg architect fees, consultant fees etc.
We look forward to your reply.
As long as you purchased the properties with the intention of using them as your home you will not be up for GST or income tax on their sale. If you have not used them in anyway to produce income while you have lived in them and have not covered another property with your main residence exemption during the time you have owned them then you will not be up for CGT on their sale.
You should return to the ATO (through an adjustment in your next BAS) the GST the company claimed for the DA as this was not in the furtherance of its enterprise.
I am assuming the contract is just for the sale of the land, no separate sale of the DA.