Sub-division tax sums

Question from Rebecca updated on 19th November 2018:

When subdividing a property is the associated reduction in value of the original home/land package able to be deducted from the taxable amount on the subdivision revenue? I assume that the costs of subdivision would also be deductible?

We are currently considering subdivision of a 8000sqm block with an existing home into three blocks, with one being the original home and the other two constituting two sections (2000sqm in size). We expect the subdivision of the two sections to significantly reduce the existing home's value.

I currently do not have a company/partnership set up so as it stands it would all be under a personal taxation liability.




Our expert Mark Withers responded:

No, when subdividing you must make a logical apportionment of the original cost of the property against the three new lots. Generally, this would be done by splitting the land from the building using a valuation, CV or RV. Having then identified the land cost alone this would generally be split relative to the sqm of each of the resulting lots. Tax is then based on the sale price of the lots less the allocated original cost of the land acquisition and the actual costs to subdivide.



Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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