Who should buy development?

[CraigD]

We currently have rental property through an LTC and our own home in a trust but are looking at a potential development. The development is to buy an existing house/land, subdivide and build, sell the new house and retain the existing either to develop or possibly retain as a house for us to live in. Can someone explain how capital gains is taxed on subdivided / developed properties relative to original purchase/subdivision/build costs. And if we retained the second property as a home would it be free from capital gains tax when sold? And which entity is best suited to owning this development? Thanks

[Don't believe the Hype]

Very generally as i'm not an accountant is that anything you own prior to you starting to 'develop' property COULD remain untainted so if you do nothing to your PPOR and your current property but then buy a further property with the intent of developing those properties SHOULD remain untainted however CGT would still be payable if you sold these properties within 2 years of purchasing them.

When you subdivide land off the back of an existing property makes things complicated, we have recently subdivided land off the rear of sections with the intent of establishing new dwellings for the purpose of renting (not selling) these properties are not subject to CGT and even though we have subdivided and established new dwellings multiple times given the new properties are held as rentals there is no tainting of these properties.

The issues is that the IRD can make their decision on your activity retrospectively and can use the pattern or past behaviours to establish if you are a trader/developer and the IRD position is guilty until proven innocent which means you need to provide an often costly defense should they lay claim.

[Nick G]

You should call your accountant and pay for an hour of their time. This is the poster child of "way too complex to be making any kind of decisions based on free advice, even if that advice comes from other accountants."

If your accountant is lower level or unsure I know somebody who offers tax advisory services, just shoot me a PM with your email happy to introduce you to her.