Capital Gains Tax for Vendors Selling to Developers

CGT Basics

Capital gain = sale price minus cost base (purchase price + acquisition costs + capital improvements).

Tax is paid on the gain at marginal rates, with structural discounts depending on the vendor entity.

CGT Discounts

• Individuals / trusts: 50% discount on gains held more than 12 months
• Companies: no discount; 30% tax on full gain
• SMSFs: 33.33% discount on gains held more than 12 months (effective 10% tax rate vs 15% normal)
• Foreign residents: no discount (post-2012 changes)

Main Residence Exemption

A primary residence (PPR — principal place of residence) is generally CGT-exempt.

Conditions:
- Dwelling on the land
- Vendor has lived there
- Not used for income production (or only partly)
- Land size up to 2 hectares included (excess potentially taxable)

For larger blocks (3,000sqm+, common in Brisbane "splitter" suburbs), the area above 2 hectares may not qualify for full exemption.

Brisbane-Specific Considerations

Common Brisbane scenarios:

Family home with big backyard
- House on 1,500sqm = full exemption typically
- House on 4,000sqm = exemption to 2ha, excess potentially taxable

Investment property
- Full CGT applies; 50% discount if held more than 12 months
- Past 90 days of "principal residence" treatment can complicate

Inherited property
- Cost base = deceased's cost base (in most cases)
- 2-year window for CGT-free sale if inherited as PPR

Subdivision before sale
- Each lot is a separate CGT asset
- Cost-base apportionment per ATO methodology
- Significant complexity; specialist advice critical

Structuring Decisions

Key questions for vendors:

1. Who owns the land? (Individual, joint, trust, company, SMSF)
2. How long has it been held? (12-month threshold)
3. What's the cost base? (Purchase + improvements + acquisition costs)
4. Has it been a residence? (Main residence exemption)
5. Has it been income-producing? (Affects exemptions)

Vendor Strategy

1. Engage a specialist accountant 6+ months before sale
2. Document the cost base — receipts, improvement records
3. Consider timing — financial year crossing can defer tax
4. Explore trust / company structuring (limited scope post-sale)
5. Don't overlook small bases — landscaping, hardstand, ancillary structures all add to cost base

This article is general information only and is not legal, tax, or financial advice. Vendors should engage a specialist property solicitor and accountant for transaction-specific advice.

About ACRES

The Australian Commercial & Residential Group (ACRES) is a Brisbane-based specialist property advisory firm focused on development site sales, off-market transactions, and strategic landowner advisory across South East Queensland. Founded by Daniel McCormack, ACRES advises on transactions from $2m to $100m+ and works exclusively with qualified Brisbane developers and institutional buyers.