What's wrong with this plan..

[theducks]

1) Buy house on 760m2 of land for $370k.

2) Subdivide land for additional $20k in fees.

3) Sell back battleaxe for $200k.

4) Sell front with remaining original house for $350k.

5) $160k profit

Aside from tax implications on the profit, what am I missing here?

Comments

[justadecoy.livejournal.com]

R-Codes governing if you can subdivide in that region (wherever it is): http://www.wapc.wa.gov.au/Publications/37.aspx

Tax Implications

[(Anonymous)]

Talk to an accountant regarding the Tax Implications. Otherwise you may have to live in the house for a while to avoid Capital Gains Tax. Which could be kinda sucky because someones going to be building a house on your back doorstep for 6-12 months.

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[conradin.livejournal.com]

I suspect also it depends how quickly you can make all this happen.

[dr-jekyl.livejournal.com]

That sounds awefully like what we're doing, only the block is a bit over 1400m2, we're getting it for $250,000 and subdividing at least three times.

The capital gaing thing is what you've got to look out for, as I understand it. It ahs the potential to wipe out your profit. That's what we're investigating at the moment, and why we may be waiting a year before doing anything.

[dilettantiquity.livejournal.com]

Your first issue will be zoning, in that it might not allow you to subdivide.

However, if you're allowed to go ahead with it, the main thing to check out are the GCT implications. You can dodge them entirely on the original house if it's classified as your main residence, which will require you to have lived in it at some point.

As you are an individual rather than a company, you'll also be eligible for a 50% discount on any CGT on assets you've held for over a year, so you may want to factor that into your timing. I think this caps your maximum CGT payable at around 25%.

Good luck!

(Standard disclaimer: I'm not a tax professional; this comment is my own opinion, seek professional advice, etc.)

[theducks.livejournal.com]

Hmm yeah, if you have to hold onto it for a year, and predictions on Perth's property market issues are to be seriously considered, then perhaps it's not such a great idea.

(Standard disclaimer: I'm not a tax professional; this comment is my own opinion, seek professional advice, etc.) - Of course :)

[dilettantiquity.livejournal.com]

I wouldn't write it off entirely - sure, the tax on any gains will be doubled if you hold it for less than a year, but if it's lucrative enough in the short term you could still be looking at a decent profit.