subdivision implications

Question

Hi Julia

I purchased a house on a 1100m2 block of land for 820000 in 5/09, the house is my PPOR, I am planning to subdivide the block which would leave a 400m2 land for development, which I plan to sell, with an approximate value of 600 000, the house valuation stands at 1 300 000 officially valued.

How much tax approximately would I have to pay on the sale of the land.

Answer

I am assuming that you simply purchased the property to use as our main residence but later started to consider the possibility of subdivision. If this is not the case and you had at the time of purchase, as an intergratal part of you plan, the idea to subdivide and sell then you are undertaking a business venture so no 50% CGT discount and you would have to charge GST.
Back to the situation where you are simply trying to realize part of your home block in the most effective way, in other words not as a business venture just the sale of a capital asset. The cost base for the back block needs to be calculated by apportioning the original purchase price of the whole property between the house and land and the vacant land as if they were bought separately at the time. A valuer can do this for you. Then you add to the cost base of the vacant block its share of purchasing costs plus items that directly effect it such as water connection but much of the subdivision costs will need to be apportioned between the two properties as they have contributed to both sides obtaining independent title. A portion of rates and interest can also increase the cost base then finally add on the selling costs. The capital gain is the difference between this and the selling price. Any capital losses you may have then reduces the gain and then the 50% discount is applied. There is no portion of the gain that is exempt under your main residence exemption as the land is not sold with a dwelling on it.

. .
Have a question about tax you need answered?

. Ask your own tax question here for only $79.95