With regard to the 50% discout on capital gain, if you have held the asset for more than 365 days.
If you buy land then build on it. When does the 365 day period start?
Thanks
Hi Jett
I believe it is from the contract date of the land, but it always best to contact your accountant for proper advise.
Regards
Regrow
You are a fool for 5 seconds if you ask a question, but a fool for life if you don’t.
yeh the contract date is probably correct, but if your intention was to build and sell then it is not a CGT event anyway, it’s just normal income.
http://www.megapropertygroup.comINVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT
It has now turned from a block of land to a develpoement, you will pay normal tax rates if you do not rent it out or live in it for a period of time.(ussally 12 months).
I was going to redevelpoe a block I had for 10 years and it was going to happen to me .
But you can get the block revalued before you develope and pay CGT on the margin of profit up to date, then you will pay normal tax on the differance onces its develpoed.Monopoly, my favourite game
The whole CGT vs development income is a shady affair. The definition from the ATO says you pay CGT when an asset you own that is not held as trading stock or production input is sold (a CGT event) NOTE: an abridged summary. So the question comes down to whether your block of land is considered “trading stock/production input” or considered a captial asset. If you buy a house and rent it out then sell it can also be deemed “trading stock” !!! It largely comes down to intent, primary purpose, frequency and regularity.
eg:
I bought a block of land in WA (I’m in VIC). I intend to build a house and rent it out much like I’ve done here in VIC as an investment (presumably to secure my retirement). Once the house is built however I find I can’t afford to add the finishing touches required to rent it out and I can’t afford to maintain the mortgage so I sell it. In this case it would be a CGT event as the intent and purpose of the development was to hold as an income producing asset. Also this is the first and likely the only time I’ve done this, thus it can’t be considered as trading stock as i’m not conducting a business or in an enterprise creating income through development.On the other hand if I buy a block of land, subdivide, build two units, sell and buy another block of land… well the ATO would likely rule that I’m using land as trading stock or as production input to produce income. My intent is to use the land for income purposes and that counts. Just like if I bought a pile of wood and built furniture from it I couldn’t claim CGT when I sell the wood (as a dining table). There are also GST considerations. That is if you register for GST you can claim back GST spent on developing the land but then you must add GST to the sale price.
Having looked into it myself I decided it was best to clearly define what I want to do with each block of land I buy so I can engage the services of an appropriate adviser when/if required.
PS: the above scenario is not true, just an example.
Surrey.
Thanks for the replies.
So if I buy a block of land build a duplex, and then sell both. The whole profit is added to my salary income and taxed at that rate(47 cents in the dollar).
And for it tobe a capital asset I have to hold it for 12 months after completion.
Is that correct?
If so, whats the best way to avoid paying the top tax rate.
Determining whether something is on revenue account vs capital account is a complex area which you will need to discuss with your accountant.
You will need to determine whether it is a mere realisation of a capital asset or something more. Cases to consider include Scottish Australian Mining Co Ltd v. Federal Commissioner of Taxation , FC of T v. Whitfords Beach Pty Ltd, FC of T v. Myer Emporium Ltd, Westfield Ltd v. FC of T, McCorkell v. FC of T, Statham v. FCT, Casimaty v. FC of T.
Also consider Taxation Ruling TR 92/3.
JETT before you add that profit to your assessable income you would need to pay the gST which in very loose terms works out to be 1/11th. so if you made $110k, pay $10k GST, then pay the 47% or whatever ont he $100k.
you are much better off being a passive investor, so yes build them, rent them for a while and if you wish to realise them then do it over a period of time.
http://www.megapropertygroup.comINVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT
Greetings,
With the premise that the only dumb question is one not asked– my example is —
Land to be bought very soon with sole intention of putting house on land to sell asap but certainly within the 12 mnths.(Intention,Note)
The builder we will use is partner in the development and his company is building to “fixed price”
(incidentally we are doing 2 at once side by side but not duplex)
So the dumb question is __ How is the GST and CGT calculated if at all..
Thanking you Len
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