OVERVIEW
Overview
A home in a reconstruction or redevelopment district becomes an association member's occupancy right on the date the management and disposal plan is approved. This is not merely a change of name: it is the point at which the exemption requirements, the house count and the availability of the special long-term holding deduction all change. If a home is then bought to live in during the project, the replacement housing relief comes into play, and once construction is complete the structure of the gain calculation depends on whether settlement money was received or paid.
VALUE Tax & Accounting places the project schedule, from establishment of the association through completion and occupancy, alongside the client's own holding record, and examines what should be sold and when. We set out the tax position at each point by reference to the approval date of the management and disposal plan, the demolition date and the completion date, and manage the residence requirement and disposal deadline of the replacement housing relief to the day. Where settlement money has changed hands, the existing entitlement value and the additional payment are separated in determining the acquisition value.
KEY ISSUES
Key tax issues in reconstruction and redevelopment
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01
Approval of the plan and conversion to an occupancy right
After the approval date the property is an association member's occupancy right rather than a home. Where the exemption requirements were already satisfied on the approval date, however, a sale as an occupancy right can still be exempt, so that position must be confirmed as at the approval date.
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02
Occupancy rights and pre-sale rights in the house count
An association member's occupancy right, and a pre-sale right acquired after a specified date, are counted when the exemption and the heavier rate for other housing are assessed. The count applies even though the project leaves nothing to live in.
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03
Replacement housing relief during the project
A replacement home acquired to live in after the date the project implementation is authorised can be exempt where the requirements are met. Both the residence period in the replacement home and the deadlines for moving into and disposing of it after completion must be observed.
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04
Settlement money received and additional contributions
Where the sale price is lower than the entitlement value and settlement money is received, that portion is treated as a transfer and taxed; conversely an additional contribution is added to the acquisition value. The association's settlement records must be kept.
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05
Acquisition timing and deductions on a sale after completion
Where the completed home is sold, the land and building portion and the portion represented by the settlement payment have different acquisition dates, so the special long-term holding deduction is calculated separately for each. Without the association's records the deduction may be reduced.
HOW WE HELP
How VALUE Tax & Accounting responds
Matching the project schedule to the holding record
We obtain the dates of establishment of the association, project authorisation, approval of the management and disposal plan, demolition and completion, place them alongside the client's acquisition and residence record, and set out the tax position at each point.
Modelling the sale date
We calculate the position for a sale as an occupancy right, a sale after completion, and a sale of the replacement home first, and compare the tax burden and the cash flow of each.
Obtaining the association's settlement records
We obtain the entitlement valuation and the settlement statements for contributions and settlement money from the association, reflect them in the acquisition value and necessary expenses, and prepare them as filing evidence.
FAQ
Reconstruction and redevelopment FAQ
Q If the exemption requirements were met before approval, is a sale as an occupancy right exempt? expand_more
Where the single-house exemption requirements were satisfied as at the date the management and disposal plan was approved, the exemption can apply to a sale made as an occupancy right. Meeting the requirements after that date is not recognised, so the reference date must be established precisely.
Q If I hold an occupancy right, is selling another home treated as a single-house sale? expand_more
An occupancy right is counted in the house count, so the position is in principle one of two properties. Exceptions apply where the replacement housing relief or the temporary two-house requirements are met, so acquisition timing and residence periods must be confirmed.
Q Can a home moved into during reconstruction be exempt? expand_more
Where it was acquired to live in after the date the project implementation was authorised and was actually occupied for the required period, the replacement housing relief can provide an exemption. The requirements also include moving into the new home after completion and disposing of the replacement home within the deadline.
Q Settlement money has been received. Does it have to be reported separately? expand_more
Settlement money received in cash in excess of the portion of the entitlement value taken as the new unit constitutes a transfer and is reportable. The records issued by the association at the time of settlement should be retained.
Q What happens if the association's records are not available? expand_more
Where the acquisition value and necessary expenses cannot be evidenced, the deductions are lost and the tax increases. Requesting the management and disposal plan and the settlement statements from the association office is the most reliable step.