Hey all,
I’m back in nz at the moment buying property after living in sydney for a while, just doing up houses and renting out for cashflow (just like everyone else) with a few quick flips thrown in..
it’s a nice enough life here and I’m doing quite well to be modest – just bought house #7 :o) but would much rather be doing property back in sydney – sunshine, beaches etc … and with property prices being higher in australia, there is a better margin for profit with quick flipsquestion, you don’t pay capital gains tax on a property if it is your primary place of residence right? (assuming it’s bought personally and not within a trustcorporation etc)
with that in mind, what’s to stop someone (me) buying a rundown property in sydney, living in it for a couple of months to do it up, sell it off (for a profit), pay no capital gains tax and repeat as necessary until rich?
do you have to live in a property for a minimum period of time before it is classed for tax purposes as your “primary residence?” or can you do this so long as you don’t do it too many times over in a given period? (i.e. 2-3 in a fiscal tax year)
any advice would be greatly appreciated, it seems to be the only way to make money from real estate unless your willing to go long term negative geared (and have lots of money :o)
also, I know the land tax rates for nsw have been reviewed, does anyone know a good website for info on this as well as government/mortgage stamp duty and capital gains tax rates, I reckon the ato site would be a good start but just incase there is a better resource out there? and if anyone has done or wants to do quick flips in Sydney, let me know, the more the merrier is my policy on that
Massive Respect
CorporateMonkey (nathan)
I beleive that there is no set period in which you have to live in a house for it to be your main residence. 1 day would probably qualify – all you have to do is justify yourself if audited. Keeping evidence like changing address with the electoral roll, RTA etc will help.
I did hear of one case where someone purchased a house using the FHOG and did not atually live there. He just changed his address, got the electricity connected in his name etc and left it there unrented while living with parents. The SRO made him give the grant back, he appealed and lost because the amount of electricity used during this time clearly showed no-one was living there.
Anyway, if you want to buy and sell within short periods the ATO could deem you to be doing this as a business and therefore you could be liable to pay tax on the profits made. It would probably take a while for them to detect this – if at all, and you would probably have to do a few in a short period of time to be caught out. It is just something else you have to plan around.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for that Terry, I thought that might be the case… I also imagine that there must be a few people around that are doing this to avoid capital gains tax… not as an illegal tax evasion method but a type of way “around the system” I might ring the ato to be cheeky and see if they have any thoughts/policies about this(obviously giving a fake name with inquiries *joke*)….
I have enough in passive income from properties around the place to not have to work, so my aim would be to do it more or less full time which is where I imagine you could run into problems being that it would be my primary source of income in australia.. so maybe i would be taxed on profits at an income tax rate rather than capital gains tax – in any case, you would still be subject to stamp duty (6% in nsw?? with the exception of your first property purchase which is exempt under 500k in sydney metro area i think)
obviously would live in the first property that I buy in sydney for the first 12 months to avoid the issue of paying back the 7k grant… at any rate, I can’t imagine doing more than about 2 a year.. the other way around this is to join with a few other people, once a year – each buy a run down property in their name only, all work together to renovate them all then all share in the profits equally on final sale (any takers? haha)
thanks again terry, very useful information as always from you :o)
CorporateMonkey :o)
The ATO really wants to know if you are doing this as a business. If it becomes your major source of income, you can bet that they’ll want to tax it as income.
Hi All
If you were going to buy properties not live in them do a reno and sell before the 12 month period.I realise there is no CG discount would you then have to register yourself as a bussiness and pay GST and of course tax if it’s your only source of income.I have just finished a reno on a unit we have had for 2 years and I have just purchased a 3bed house to reno.I would love to keep doing this.Not sure whether to hold and rent out for 12months to get CG discount.Or keep buying and selling.Even though I’m paying more tax I’m still making money.Any thougts.
Thankyou lisa.[biggrin][biggrin]
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