Paying tax on subdivided section

[BDub]

Situation- brought a house 2 years ago and done a full reno on it, we are currently going thru the process of subdividing the backyard and getting plans done up to build.

We have found another deal that has a far greater profit that we would like to try get.

We are thinking about selling the property we have renovated and are happy with what agents indicate it will sell for. Since we are living in this property and it’s been over two years I believe this is exempt from the bright lines test?. My question is if we were to subdivide that back section and sell it at the same time would it then fall under the bright lines test or does it get exempt since it was our “main home” that we owned over 2 years?

If the section is taxable would it be worth selling un-subdivided but with all the paper work in place to complete the process?

[Anthonyacat]

You're correct that the subdivision will be safe from the bright line test based on the facts above.

However, subdivisions are taxable by default - unless you meet one of a number of exceptions. Advise you contact a property accountant for a quick meeting to get a clear view - if they charge you a few hundred dollars it's a bargain for the advice you'll get.

You may have a good idea with the sale pre-subdivision, but you'll limit your audience a little.

[Beano]

Let us know what the accountant advises after you talk to them.

[robert786]

even my situation is same ,i think it is win win situation if u subdivide and then shift to new dwelling and sell main home or gift new subdivided to any family member

[Rosco]

Hi all,

Tax on property is never simple. There is not a simple answer that applies to every situation, especially when you add subdivisions into the mix.

It is best to get expert advice from a property accountant about your specific circumstances.

There are some great exemptions for personal houses that can be utilised, but there is also some easy ways to fall out of them!

Ross

[BDub]

Missed out on the property I was after. So will carry on with the subdivide/build.

Thanks for the advice guys

[robert786]

pl let me know whom u have selected for carrying out SD and building

[azinda]

Subdivision - rural - curly query.

Anyone with experience re tax in this scenario (am asking here as IRD online tool is useless and IRD advisors just say 'each case is different'.

If one subdivides a hectare off a block which they have owned and lived on for 14 years, spends $xyz,xyz in the exercise, then sells the hectare off, is the amount received in the sale taxable? If so, how is the amount of tax calculated? eg are the costs incurred in the SD exercise subtracted from the profit first and how do you factor in the resulting lesser value of the remaining house and land as now its lost (sold) a hunk of land - its worth less.

My accountant is not a SD expert - so I thought I'd ask here for an education. I was told no tax would be payable as I've owned it many years, but seeing how gumint taxes everything that moves - I'm not sure this is correct. I'd like to know what the tax position will be. If anyone can recommend a SD accountant/ lawyer with SD experience who knows what they are talking about that would be also great.
Thanks - A

[Rosco]

Hi Azinda,

If your accountant doesn't know the answer, generally they would get a second opinion from a tax expert they use.

In general there is no tax if you have already owned it for over 10 years, but it does depend on your exact circumstances and there is ways it could be taxable.

Ross

[azinda]

Hi Rosco - thanks for your reply. Can you briefly explain in what ways it could be taxable. Many thanks - A

[Rosco]

Sorry not the kind of information I would get into on a forum. It is expert advice and land tax rules are extremely complicated, with lots of if's and but's.

As above, I would get your accountant to get a second opinion as they know and understand your full scenario and it should be very easy for them to do this.

Ross

[azinda]

Thanks Roscoe, shall do this. Cheers A