Sub Dividing Land? Here is What You Need to Know.

Many of our clients subdivide land for various purposes whether it be for long term investment or in the form of a business.

When a block of bland is subdivided, each subdivided title becomes a separate asset for Capital Gains Tax (CGT) purposes. However, it’s a big misconception that the act of subdivision triggers a tax liability.

The act of subdivision DOES NOT trigger a tax liability, until the eventual sale of the subdivided block.

See below our Top 5 items to note if you’re thinking about subdividing:

• The purchase date of the subdivided assets is the same as the original purchase date.
• Cost base is apportioned based on area, usually undertaken by a Quantity Surveyor.
• There is NO CGT triggered when you subdivide land.
• Stamp Duty exemptions apply on a state-by-state basis.
• Structure (Trust, Partnership, Company, SMSF etc.) of a project to be considered on a case by case basis, looking at the ultimate intention of the assets and who will hold them.

These areas of tax can become complex and costly for those who do not plan for and structure correctly. There is ever growing compliance and data matching technology between the State Revenue Offices and the ATO.

Having the right conveyancing/ legal team in place, and all working in conjunction, will minimise risk and keep you informed across the entire process.

The ATO have come comprehensive guides to refer to on their website https://www.ato.gov.au/individuals/capital-gains-tax/property-and-capital-gains-tax/subdividing-and-combining-land/

To discuss any of these items in further detail, please reach out to your Tax & Advisory client manager or contact us on info@thegildgroup.com.