APC Benefits of Subdividing Property (Potential Financial and Lifestyle Benefits)

Subdividing property has become an increasingly popular option for Western Australian homeowners looking to make the most of their land. Subdivision offers a range of benefits for Western Australia's housing supply limitations by helping free up land in established suburbs while providing a financial boost for homeowners. Let's take a closer look at the benefits of subdividing property and why it may be an excellent option for you.

Unlock Financial Gains

A primary reason homeowners choose to subdivide is the potential for financial gain. Some may choose to sell their land as a development lot, while others want to create opportunities to build a rental property to create long-term cash flow.

Downsize Without Moving

Subdivision allows downsizing without leaving your home neighbourhood. Many people opting to create a smaller house on their current block can sell or rent their original property to supplement income while cutting their house running costs. Others open it up for family to live in so everyone can be nearby.

Increase Housing Supply

Subdividing a large block can help meet the growing demand for housing in established areas. Buyers can avoid living in new land estates, which often come with longer commute times, and instead build in a well-connected, established suburb.

Maximise Land Use

If you have unused or underutilised land, subdivision allows you to make the most of it. Rather than letting a large backyard or vacant space sit idle, you can turn it into an asset that benefits you and the community.

Planning the Subdivision

There are two primary types of subdivision in Western Australia:

• Survey-Strata: Created under the Strata Titles Act 1985, survey-strata lots allow for sharing services like sewer, water, and common property for access.
• Green-Title: Created under the Transfer of Land Act 1893, green-title lots are independent with no shared ownership or common property, but services like water and sewer cannot be shared.

Both types of subdivisions require approval from the Western Australian Planning Commission, and it's important to consider the timeframes and practical requirements of the process. Typically, it can take anywhere from six to nine months to complete a subdivision and receive a new title.

The Costs of Subdivision

Titling the Lot

While subdividing property offers many benefits, it's not without its costs. Subdividers must factor in the total costs of creating a new titled lot, including surveyor fees, government approvals, clearing the backyard, and providing essential services such as sewer, water, and underground power. A typical subdivision budget in Western Australia could be around $60,000, depending on the property and your local council.

Tax Considerations

Before jumping into subdivision, it's essential to understand the potential tax implications, particularly around capital gains tax (CGT).

• CGT on Post-1985 Properties: If you purchased your property after September 20, 1985, any profit from selling a subdivided lot may be subject to CGT.
• Exemptions for Pre-1985 Properties: For homeowners who purchased before CGT was introduced in 1985, subdividing and selling the new lot may be CGT-free, which is a significant financial advantage.

To clearly understand your costs, obligations and possible tax liability, it's essential to consult a qualified accountant. Contact our team at Ascent Accountants for advice. If you wish to get an idea on what your subdivision could be worth, contact Ascent Property Co on 0493 672 956.

Maximise Your Property's Potential with Professional Advice

Before making any decisions, it's crucial to evaluate whether subdividing is the right option for you. We recommend speaking to the property experts at Ascent Property Co. for a thorough appraisal of your property and its subdivision value based on your location, zoning, and market demand.