When you're an offshore RLWT person you'll need to know the original purchase price for the property you're selling.
Your withholder needs the original purchase price. They use it to work out how much residential land withholding tax you pay on your property sale.
The way you work out your original purchase price depends on what type of property you're selling.
Getting the original purchase price for one property sale
Usually your original purchase price is in your original sale and purchase agreement.
If you're unable to get this agreement to your withholder use the Quotable value website. (You may have to pay to use its information.)
Original purchase prices for subdivided land and lots
Sometimes your property sale could be for subdivided land split into several lots. You may want to sell all of the subdivisions but the sale could only be for one of them.
When this happens you need to work out the original purchase price for each separate lot. How you work it out depends on the:
- number of lots area of each section anticipated sale prices
- frontage.
Check the examples below to see the ways you can work out original purchase prices for subdivided land.
Tom purchases a bare piece of land which is 2,000m² in size for $1,000,000. He subdivides the block into 4 separate 500m² lots and sells one of them for $400,000.
Note: Tom believes the remaining 3 lots will have the same anticipated sales price as they are similar.
| Purchase price of original block of land | $1,000,000 |
| Number of lots | 4 |
| Purchase price of each lot | $250,000 |
Tom should use $250,000 as the purchase price of the subdivided section in his RLWT calculations.
Michelle purchases a property which is 2,500m² in size and has an existing house valued at $600,000 with the total purchase price of the property being $1,750,000.
Michelle then subdivides this property which creates two new titles. She keeps the first new title consisting of 2,000m² of land together with the existing house. Michelle sells the second new title which consists of 500m² of bare land.
| Purchase price of property prior to subdivision | $1,750,000 |
| Value of building | $600,000 |
| Purchase price of bare land before subdivision | $1,150,000 |
| Purchase price of land per m² ($1,150,000 ÷ 2,500m²) | $460 |
| Purchase price of bare land for new title ($460 x 500m²) | $230,000 |
Michelle should use $230,000 as the purchase price of the subdivided section in her RLWT calculations.
Michael purchases a bare piece of land which is 2,000m² in size for $1,000,000. He subdivides the block into 4 new equally sized 500m² titles.
Although the sections are the same size, the anticipated sales values are not the same because the newly created titles have different characteristics.
Michael has worked out the anticipated sales price of each section taking into account the location, condition, size and frontage of each section together with recent local sales.
He now wants to know how to calculate the correct purchase price for each section so he can account for his RLWT obligations.
New title 1 with Anticipated Sale Price (ASP) $650,000
| % ASP total | Original purchase | Purchase price for RLWT |
|---|---|---|
| 32.5% | $1,000,000 | $325,000 |
New title 2 with Anticipated Sale Price (ASP) $500,000
| % ASP total | Original purchase | Purchase price for RLWT |
|---|---|---|
| 25.0% | $1,000,000 | $250,000 |
New title 3 with Anticipated Sale Price (ASP) $500,000
| % ASP total | Original purchase | Purchase price for RLWT |
|---|---|---|
| 25.0% | $1,000,000 | $250,000 |
New title 4 with Anticipated Sale Price (ASP) $350,000
| % ASP total | Original purchase | Purchase price for RLWT |
|---|---|---|
| 17.5% | $1,000,000 | $175,0000 |
Michael should use $325,000 as the purchase price for new title no.1, $250,000 for new titles no.2 and no.3 and $175,000 for new title no.4 in his RLWT calculations.
Janet purchases a piece of bare land which is 1,000m² in size for $800,000. There is 115m² of frontage on this land. She then subdivides this in half resulting in two new 500m² titles.
One of the titles retains the frontage and is therefore superior to the rear section.
Janet decides to keep the front section on which she will build her own private dwelling. She sells the rear section and wants to know how to calculate the correct purchase price for RLWT purposes.
Calculations:
| Frontage | Total size including frontage | Percentage of total size |
|---|---|---|
| 115 m² | 615 m² | 55.16% |
| Nil | 500 m² | 44.84% |
| 1,115 m2 |
Janet should use $358,720 as the purchase price of the sub-divided rear title in her RLWT calculations.
| Original purchase price | $800,000 |
| Portion attributed to the rear section | $44.84% |
| Purchase price of rear section | $358,720 |
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