# CGT on investment property



## legs (23 April 2009)

Hi

OK
Bought a block of land, settlement 30/06/09
Building house, finish building 5/12/09

When can i sell and and recieve the CGT 50% discount?

Is it from date of handover of house or from date of handover of block? 

We can build houses in our area, coastal retirement, holiday area and sell them $50k-$75k great than cost, totally fitted out...

Considering doing it in the Missus' name over and over while it stays this way as she may not earn a wage in the future.


----------



## Prospector (23 April 2009)

The important dates are the contract dates, not settlement dates.  In your case, I think it would be the date of the block to get the 50% discount.  But your accountant will know.


----------



## Beej (23 April 2009)

Prospector said:


> The important dates are the contract dates, not settlement dates.  In your case, I think it would be the date of the block to get the 50% discount.  But your accountant will know.




I believe this is correct.

You bought the block of land on date XX (contract exchange date, not settlement). You improved it by spending $$$ to build the house. Later you sell the land (which now has a house on it) on date YY. If YY more than 12 months later than XX, then you would be eligible for the CGT discount. Don't forget to add the capital cost of building the house to the cost base (ie cost of land + stamp duty and other trans costs) to work out your actual CGT cost base! The taxable capital gain is then your sale price (less selling costs like agents fees, advertising etc), less your base cost.

PS: Of course double check with your accountant and DYOR!

Cheers,

Beej


----------



## legs (23 April 2009)

Beej said:


> I believe this is correct.
> 
> You bought the block of land on date XX (contract exchange date, not settlement). You improved it by spending $$$ to build the house. Later you sell the land (which now has a house on it) on date YY. If YY more than 12 months later than XX, then you would be eligible for the CGT discount. Don't forget to add the capital cost of building the house to the cost base (ie cost of land + stamp duty and other trans costs) to work out your actual CGT cost base! The taxable capital gain is then your sale price (less selling costs like agents fees, advertising etc), less your base cost.
> 
> ...




So you wouldn't think it would be the date from the time we spent money on the building of the house, i.e. soil tests etc or maybe even the date we signed the builders contract, not the land part?

We had a long settlement to allow the builder to get his part ready and we are trying to time it so he can start construction a week after settlement.


Has anyone out there done this before?


----------



## Beej (23 April 2009)

legs said:


> So you wouldn't think it would be the date from the time we spent money on the building of the house, i.e. soil tests etc or maybe even the date we signed the builders contract, not the land part?




No - that would like say you bought an existing house, rented it for 5 years, then spent say $100k fixing it up/renovating (new kicthen/bathroom/extension etc etc) - which don't count as maintenance, but rather are considered capital improvements, then you sell it 6 months after that. Have you owned the house for 12 months? Yes. So you get the CGT discount - plus you get to add the amount spent "improving" the property to the original cost base.

Really though - check with your accountant if you are concerned about the contract exchange vs settlement date and the CGT time issue.

Cheers,

Beej


----------



## michael_selway (23 April 2009)

legs said:


> Hi
> 
> OK
> Bought a block of land, settlement 30/06/09
> ...




is it true that the first home you buy wont have CGT?

thx

MS


----------



## surfingman (23 April 2009)

One important question here, do you own another property? Or will this new property be your main residence? which is CGT Free. (You can only have one main residence though.)

My thoughts here are as a house would be a separate CGT asset in its own right, it would be 12 months from when the Contract is signed to build the house.

Look here for an answer

If you can't find an answer there, ill check it out at work.


----------



## surfingman (23 April 2009)

michael_selway said:


> is it true that the first home you buy wont have CGT?
> 
> thx
> 
> MS




No its not true, but if the house is your main residence its CGT free, and you can move out of that home and for upto 6 years its CGT free as long as that house is your only main residence.


----------



## Prospector (23 April 2009)

Except that he is building it now, so he has never lived in it.


----------



## legs (24 April 2009)

surfingman said:


> One important question here, do you own another property? Or will this new property be your main residence? which is CGT Free. (You can only have one main residence though.)
> 
> My thoughts here are as a house would be a separate CGT asset in its own right, it would be 12 months from when the Contract is signed to build the house.
> 
> ...




Like the Thread title says it is an investment property, not my main residence.


----------



## legs (24 April 2009)

Had an interesting conversation with the ATO.

1st call: operator Mary said its from Date of possession saying this is the settlement date. I challenged this so she put me on hold for 10 minutes then the line was disconnected. Maybe she couldn't admit she was wrong because:

2nd Call: Operator whom I cant remember name of said it is definately from date of contract signing, i.e. when both parties have signed the contract even before a deposit is handed over. The CGT event is taken from this date as a starting point. 

This is great news as the longer the settlement the better for the investor, especially if they are only holding land and it increases in value over a short period. The smaller the deposit the better also obviously.


----------



## Prospector (24 April 2009)

try this forum:
http://www.somersoft.com/forums/index.php

Search for CGT and dates and you will get lots of answers. Join and post your question - well worth it if you want. There are several property accountants on the forum and they once saved my over $10,000 because our accountant didnt know property law!  Which is why I knew about contract dates! :


----------



## tech/a (24 April 2009)

P is correct
Contract date.
So house and land would mean the House contract date.
12 mths from that.

Do it myself so been there.

No CGT on PPR.


----------



## legs (24 April 2009)

tech/a said:


> P is correct
> Contract date.
> So house and land would mean the House contract date.
> 12 mths from that.
> ...




Tax office say its the date of contract signed for property...house is a capital expense that can be added to the property...

Thats their wording...

Would probably get a ruling if it came down to it..


----------

