tax issue regarding property purchased as tenants in common

Question

I bought an old house with my cousin as tenants in common (50% each) and built a new house after demolishing the old one.We shared all the expenses in half. After the completion, he use the new house as his main principle of residence and I do not charge he any rent during the whole period. If one day he decides to sell, would I be subject to CGT on my share and he would be exempt from CGT on his share? Any GST liability for me? (FYI,the old house was not occupied before it was demolished)

Answer

Yes is the simple answer.

Providing you cousin didn’t use his main residence exemption on any other property since you purchase the old house and if it took you less than 4 years to build and he moved in as soon as practical after it was completed then he will get the full main residence exemption on his half under section 118-150

You on the other hand are out in the cold, CGT on all of your half of the gain.

GST will not apply to you if you did not build with the intention of selling for a profit and you are not already registered. There is a bit of confusion around this issue so here are the references for your Accountant.

If you are not already registered for GST you are not required to do so just because you choose to sell a property you built without the intention of resale at a profit ie holding as a rental. Section 23-5 states that if the annual turnover of supplies you make in the normal course of your enterprise, exceed $75,000 you must register for GST. Section 185-25 excludes from the calculation of annual turnover the supply of a capital asset. Building the property for rental then selling, is the supply of a capital asset and not included in the annual turnover. Building it to live in but never getting around to it is not even a business supply.

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