It’s a scenario frequently seen in suburbs across Australia. You take your valuable block of land with the old family home in the middle of it, and slice it in two, building a duplex and selling off one side to cover the cost of building a newer, shinier, family home.

However, as easy as it may sound (minus the actual act of knocking down and rebuilding), there are numerous tax consequences and traps to be considered that can catch out the uninformed.

Large blocks with older houses may be ideal for townhouse or duplex developments.Credit: Fairfax

There is no avoiding the fact that this is a profit-making venture. Going to the trouble of constructing a home to sell is a business for GST and income tax purposes. Further, there is no chance of slipping under the radar, as the purchaser is required to withhold the GST at settlement and send it to the ATO.

You are going to get the same price for the house whether it is subject to GST or not. That one-eleventh comes out of your pocket. If you face up to this at the........

© The Sydney Morning Herald