With real estate prices booming, and the supply of land in inner-suburban suburbs falling well short of demand, there have been instances where homeowners have sliced off a portion of the house block for a bit of extra cash, only to find themselves in the sights of the taxman.
It would seem straightforward enough; it’s your home it should be exempt from capital gains tax. The key issue is that the exemption of the home from CGT hinges on actually selling the home (i.e. the building that was inhabited), not just the surrounding land. Many unassuming homeowners who sliced off and sold the vacant part of their block have been left with a nasty surprise.
Tax is complex, so check with your RDL accountant each time; you’ll be glad you did.