Money, tax, mortgage question

[Guest The Pom Queen]

I am not sure which one of our knowledgeable members can help with this @Andrew from Vista Financial @Carol from Vista Financial @Ken @Alan Collett I’ve just been chatting to a friend  who lives down the road from us who mentioned that when any of us on the street sell our properties we have to pay Capital Gains. I’ve never heard of this but she says it’s on all properties over 2 hectares. She said you usually get a good valuer in who values the 2 hectares to include the house and outbuildings as the bulk of the property and the remainder as cheap bush land which will make your CGT minimal. Does this sound right?

[Gbye grey sky]

This sounds wrong.  Surely if the land and the house are on the same deed then such land does not count as ‘vacant land’ for CGT purposes.

[Guest Carol from Vista Financial]

Hi @The Pom Queen CGT is not my field so can't really comment on it but can point you in this direction:

https://www.ato.gov.au/General/Capital-gains-tax/Your-home-and-other-real-estate/Your-main-residence/Dwellings,-structures-and-adjacent-land/

https://www.ato.gov.au/General/Capital-gains-tax/Your-home-and-other-real-estate/

https://www.ato.gov.au/Calculators-and-tools/Capital-gains-tax-property-exemption-tool/

https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=CGTPET&anchor=CGTPET/questions#CGTPET/questions

[Gbye grey sky]

Looks like your friend was right however if the additional land is just bush I guess it’s value will be minimal.

[Booma]

52 minutes ago, The Pom Queen said:

I am not sure which one of our knowledgeable members can help with this @Andrew from Vista Financial @Carol from Vista Financial @Ken @Alan Collett I’ve just been chatting to a friend  who lives down the road from us who mentioned that when any of us on the street sell our properties we have to pay Capital Gains. I’ve never heard of this but she says it’s on all properties over 2 hectares. She said you usually get a good valuer in who values the 2 hectares to include the house and outbuildings as the bulk of the property and the remainder as cheap bush land which will make your CGT minimal. Does this sound right?

 

I don’t remember exactly what our solicitor said when we bought our property but that sound familiar. 

[Guest Carol from Vista Financial]

Probably best to speak to a tax accountant as each person on the street will have a different circumstance

[Gbye grey sky]

Well, this looks pretty clear cut.

When selling your home, you can generally claim the main residence exemption for:

• the dwelling you live in and associated structures, such as a separate laundry or garage
• land adjacent to the dwelling, up to a maximum of two hectares.

 

Land adjacent to a dwelling may also qualify for the main residence exemption if it and the dwelling are sold together and both of the following apply:

• during the period you owned it, you used the land mainly for private and domestic purposes in association with the dwelling, and
• the total area of the adjacent land and the land on which the dwelling stands is not more than two hectares (4.94 acres).

If the adjacent land is used for private purposes and is greater than two hectares, you can choose which two hectares are exempt. The remainder is subject to CGT.

[Ken]

2 hours ago, The Pom Queen said:

I am not sure which one of our knowledgeable members can help with this @Andrew from Vista Financial @Carol from Vista Financial @Ken @Alan Collett I’ve just been chatting to a friend  who lives down the road from us who mentioned that when any of us on the street sell our properties we have to pay Capital Gains. I’ve never heard of this but she says it’s on all properties over 2 hectares. She said you usually get a good valuer in who values the 2 hectares to include the house and outbuildings as the bulk of the property and the remainder as cheap bush land which will make your CGT minimal. Does this sound right?

Yes, that's right. The full main residence exemption is only available on homes that are on land of 2 hectares or less. As your neighbour has told you, just get a valuer to show the majority of the value is in the house and a parcel of just 2 hectares of land and that the rest of the land has very little value.

[Parley]

5 hours ago, Ken said:

Yes, that's right. The full main residence exemption is only available on homes that are on land of 2 hectares or less. As your neighbour has told you, just get a valuer to show the majority of the value is in the house and a parcel of just 2 hectares of land and that the rest of the land has very little value.

But that would be tax evasion if it isn't true.

I wouldn't be recommending anything that might be illegal as it might get Pom Queen thrown in the slammer.

[Ken]

3 hours ago, Parley said:

But that would be tax evasion if it isn't true.

I wouldn't be recommending anything that might be illegal as it might get Pom Queen thrown in the slammer.

Why wouldn't it be true? Land that you can build on (which would include the footprint of the existing property) is much more valuable than bush land that you can't. A flat paddock is also considerable more valuable than a bush covered slope. It's simply a matter of ensuring the most valuable land on the property is included in the exempt 2 hectares and the least valuable in the area subject to CGT.

[Alan Collett]

On 27/07/2018 at 20:01, Parley said:

But that would be tax evasion if it isn't true.

I wouldn't be recommending anything that might be illegal as it might get Pom Queen thrown in the slammer.

But it will be good tax advice if it is.  

Best regards.