Hi All,
I wanted to know the differences between resi investing versus developing. That is should you set up for GST. different structures to purchase, the taxation implications and any other questions I have not thought of etc
Can anyone assist ?
Cheers
MIKALA
well you could write a book to answer these questions and still not cover it all. you will need to be a little more specific… are you developing to sell or to hold?
in my mind, developing is like retailing a product. the govt hates anyone making a dollar without their large cut so the tax treatment of it is harsh. You will need to pay GST and pay full tax.
investing is more of a passive activity with favourable tax treatment, whereby you are eligible for the 50% CGT discount.
the lines become blurred tho when you start developing to invest.
http://www.megapropertygroup.comINVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT
One of the biggest differences if you decide to sell of all your product is you do not need to deal with tenants….for some that can be a very large advantage…instead you’ve got fussy (or discerning if you are high brow) buyers to deal with.
I think dealing with councils is more involving, and constantly struggling with scheduling of contractors would be another, as opposed to the odd plumber or sparky call out for simple maintenance issues.
I believe timing of the market is more critical in developing, as it can change dramatically from project feasibility through to product realisation…especially if it is a large involved development.
Ausprop,
I was thinking of both scenarios – I suppose we have already been developing to hold – we have only bought land, built then rented so I guess I was wondering about the differences if you were developing to sell (is it really called property trading ??)
Doesn’t the CGT 50% after 12 months still apply?Dazzling,
Thanks for your reply…I suppose there are pros and cons to both investing strategies….we have been very fortunate with our tenants (touch wood – I do not want to jinx ourselves at this stage of things)Anyone else have another viewpoint on these scenarios ??
Cheers
MIKALA
no you wouldn’t be eligible for the 50% discount as it is no longer a capital asset – it is effectively just trading stock. Developing to sell is basically trading yes (tho you don’t have to develop to be a property trader of course). You may be able to slip one thru as a capital realisation perhaps – speak to an accountant re this.
GST would also apply… it works out to be roughly 1/11th of your profit. So if you develop in your own name you can end up paying between 55 to 60% tax roughly. If you develop in a truat and distribute to a company you may be able to get that down closer to about 37% or so.
http://www.megapropertygroup.comINVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT
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