The tax implications of subdividing your backyard

Posted on April 16, 2015 by | 2 Comments
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Subdividing your PPOR (principal place of residence) is a strategy we often get asked about. If you’re thinking about going down this path, there’s a lot to consider before making your decision.

By Pat Mannix and Rebecca Mackie

There are many different strategies with different outcomes, depending on whether you’re planning to sell the part with the house, or the vacant land, or build and move in, build and rent out or build and sell straight away. All these are options to consider and each has its own tax issues!

An example of the most common subdivision situation and the capital gains tax and tax deductions is set out below:

SUBDIVIDE AND SELL VACANT LAND

Jacinta purchased a half-acre block with a house in 2012 for $600,000. At that time the house was valued at $180,000 and the land at $420,000. Jacinta incurred stamp duty and conveyancing fees of $32,000.

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