Capital Gains Tax and Subdivided Land

Subdividing the block of land on which you live and then selling the resulting blocks could result in a capital gain. Each block will have its own title and will for capital gains purposes, be a separate asset. The block that has the dwelling on it, and that is occupied by the owner as their main residence, will qualify for the main residence exemption.

But what of the other block?

According to Australian Taxation Office rules if you dispose of this block to the same person and at the same time as you dispose of the main residence, the exemption extends to the new block. However, if you dispose of the other block to the same person but at a different time or you dispose of both blocks to different purchasers, Capital Gains Tax will apply to the nonresidence block. If property growth in your area has increased substantially since your original purchase, the amount of the gain could be considerable. So, before subdividing and selling your land, obtaining advice as to the likely outcome of such a sale would be a very wise move.