Hi everyone,
I have recently joined this site, and have also recently begun my first development. It's still in the setup stages, and is a joint venture, but I have a question on working out CGT.
The development that I am involved in is to purchase a block of land with a DA in place for the construction of 6 townhouses. The plan being that each of the 3 investors will get 2 townhouses each at the end of it.
If I sold both of those townhouses, not that that's my intention, how would I work out my actual Capital Gains?
For example – if land cost $100,000 and construction cost for 2 townhouses was $100,000, then other associated costs, legals, stamp duty, etc. all came to $20,000. Total construction costs would be $220,000.
So total costs per townhouse would be $110,000.
If I sold one townhouse for $150,000, do I have to pay CGT on the amount of $40,000? Is this the correct way to work it out?
Obviously these are dodgy figures, but have I got the concept correct?
iF you had the town houses for 12months ( and I am pretty sure its from the time of construction not completion) then you should get a 50% break from your CGT – making it $20 000 – paying your nominal rate of tax on that amount .
I would say the way you worked it out is correct – the cost of the whole project / no of Townhouses
Do you have a life partner? you can form a company (as my wife and I have) and the profit of 20,000 (40,000 – 50% break) can be divided amongst individuals who form the company and the company itself and therefore each portion of the profit is subject to a lower tax bracket. Probably dosen't make sense so make sure you speak to an accountant who specialises in the subject. don't forget if you re-invest the profit into your next investment it wont be taxable untill your next profit and so on and so on………but speak to an expert!
Thanks heaps for that info.
I am married, and we are planning on forming a family company under the advisement of a mentor. Fingers crossed this will be the first step towards bigger and better things.
Most likely you will also have to pay GST. Check with your accountant.
npg wrote:Do you have a life partner? you can form a company (as my wife and I have) and the profit of 20,000 (40,000 – 50% break) can be divided amongst individuals who form the company and the company itself and therefore each portion of the profit is subject to a lower tax bracket. Probably dosen't make sense so make sure you speak to an accountant who specialises in the subject. don't forget if you re-invest the profit into your next investment it wont be taxable untill your next profit and so on and so on………but speak to an expert!I think you mean a trust.
Just to clarify, profit of a company is taxed at 30%, and there is no Capital Gains Tax Discount. A trust's profit is taxed in the hands of the beneficiaries, and if the beneficiaries are individuals, the 50% discount can be used.
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