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Subdivision question

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  • Subdivision question

    Hi guys, me and my partner have been in our first home for a couple of years now and are looking at subdividing. 1000m2 section, front house is well positioned, driveway is wide enough etc. House is currently valued at $600k and we owe $460k. Just wanting some advice on anything i may have missed with our calculations below and if you think it is worth pursuing. Interested to hear any other options you would recommend

    +$520000 - sell original house after subdivision
    +$650000 - sell new house after subdivision
    = $1170000

    -$100000 - subdivision cost
    -$300000 - build cost (im a builder)
    -$460000 - mortgage on house
    -$50000 - cost to sell both properties

    = $260000 deposit for next home?
    I assume there would be tax to pay out of this? Can tax be avoided if we moved in to the new house for a while?

  • #2
    does rent cover finance costs? If so retain and avoid tax implications you will still have the equity for that next house?


    • #3
      There're very few exceptions when it comes to subdivision. Seems your intention is to subdivide and sell and as such any gains are taxable. Sorry but minus 33% to your deposit


      • #4
        what are the exceptions?


        • #5
          I've got confused myself but it's something like subdivided to rent, to live and I think when you owned land for more than 10 years


          • #6
            Hi James

            1) How much is section worth by itself? For example if worth $350k using simple maths, then just selling the section would give the same result as building.

            2) There are some great exemptions to tax on subdivision, so I suggest you get some expert advice on this. There are a couple of different ways you could avoid some or all of the tax in this situation.

            3) If you do as you say, you might be able to avoid tax on the section with exemptions, but if you build new house on the back and sell, the profit on the build will still be taxable, and you would have to consider GST too.

            Get some help, as you might be able to twist how you are going to do this slightly, to become tax effective!

            Also make sure you know and understand builder rules long term, and also watch your pattern with persona home.

            Book a free chat here
            Ross Barnett - Property Accountant