PEOPLE who move out of their homes during renovations could face serious tax consequences.
McCullough Robertson Lawyers partner Mark West, says if home owners move elsewhere during renovations they may not be able to claim principal place of residence (PPR) reductions.
He cites the case of Jackman v Commissioner of Land Tax (2010) as an example, where a couple’s Hedges Avenue property took a year longer to renovate than expected.
“Although the PPR deduction is generally claimed without dispute, sometimes the Commissioner denies the availability of the deduction, as a Gold Coast couple recently discovered during a particularly difficult renovation,” he says.
“Whilst they tried to hold out and live in the Hedges Avenue property during the renovation ordeal, they found it too difficult and began to more frequently utilise another nearby property they owned, which was set up as a holiday home.
“The Jackmans were not residing at the Hedges Avenue property at 30 June and the Commissioner took the view that the PPR deduction should not apply, meaning that land tax was payable on the Hedges Avenue property – given the location of the land the assessment was significant.”
But after the couple appealed to the Land Court it was found that the use of the Hedges Avenue land was as a building site, so its value would be excluded for land tax purposes.
“The Jackman decision demonstrates the difficulties that can be faced from a land tax perspective that are not normally in the minds of renovators,” says West.
Meanwhile the king of prestige property sales on Hedges Avenue has copped a bit of flak lately as property prices spiral downward, but it’s a case of don’t shoot the messenger for Michael Kollosche.
The Ray White Broadbeach sales gun has seen fortunes made and blown out to sea on the Gold Coast’s most prestigious beachside strip, but in the last 18 months tensions have escalated.
“It’s unfortunate that people have lost a lot of money on Hedges and they are often the ones that bought at the top of the market,” he says.
“I have lost a lot of money too, but I don’t go throwing mud at people. When the market runs it runs, but if you have leveraged high and didn’t plan for the worst, you can quickly be caught out.
“Banks are so tough now with their lending criteria. The majority of sales over the last 18 months have been cash buyers.”
Kollosche cites the yellow Beach House property as an example. Now on the market for $7 million, it sold in ’08 for $9.5 million and for $10.25 million just a year earlier. There’s a trend here folks and the man caught in the middle says it could be five years before prices start to match those attained prior to the downturn.
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