Hi All,
I’m confused as to the possible CGT on a development I’m looking at undertaking. It’s a triplex site. The land was purchased for $165k over a year ago. I intend to build 3 villas on the land once it is subdivided. Each newly created block would be worth approx $70k. The cost of each villa to build will be approx $130k. Each villa will be worth approx $270k once complete. If I sell two of the villas ($540k), and keep one, how would I calculate my CGT???
I have searched the ATO website but am still confused.
Any info greatly appreciated.
Kind Regards
Lady BugThe first issue to consider is whether the gain is on revenue account or on capital account. The facts are limited so you firstly need to determine whether this constitutes part of your business operations or whether it will be captured on revenue account as an isolated transaction.
Taxation Ruling TR 92/3 provides guidance in determining whether profits from ‘isolated transactions’ are ordinary income and therefore assessable under section 6-5 of the ITAA 1997.
Paragraph 1 of TR 92/3 defines the term ‘isolated transactions’ as those transactions outside the ordinary course of business of a taxpayer carrying on a business and those transactions entered into by non-business taxpayers.
Paragraph 15 of TR 92/3 states:
If a taxpayer carrying on a business makes a profit from a transaction or operation, that profit is income if the transaction or operation:
(b) is not in the course of the taxpayer’s business, but
(i) the intention or purpose of the taxpayer in entering into the transaction or operation was to make a profit or gain; and
(ii) the transaction or operation was entered into, and the profit was made, in carrying out a business operation or commercial transaction.
Have a good chat to your accountant about this.
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