Hi all,
How does the ATO determine if a person is a property developer then tax accordingly?
– is it by the number of properties sold in a fiscal year or the amount of profit/income generated from property sales..maybe a certain $$$threshold or somthing?Kind regards ToWhomItMayInterest
These days they tax you on how you tell them. So it depends on how you want to do it. You will have to back up your decision if they challenge you. Operating in a professional business like manner of building and selling will mean you are more likely a developer. If you do the odd house occaisionally you may not be. Maybe also GST registration is a factor. A developer would need to be registered.
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 Terry…interesting I get to choose…nice!
That being the case I think I would be far better off paying CGT vs developer tax rate of 30% plus the GST
As an investor first and foremost buying IPs for the long term I also buy large lots with old houses on then then do the demolition, subdivision, build new houses, etc. I'm considering selling a few IPs each year i.e 4 maybe 6 is this operating in a professional businesslike manner as far as the ATO is concerned?
Not sure…as long as I don't register for GST…or will the ATO slap me on the wrist and make me sign up for GST???
any comments are welcomed please do…
Yeah doing that many you are probably operating a business of developing. You will be selling new houses so will need to charge GST for them as you will be turning over $75k you will need to register for GST.
Developers don't necessarily pay 30% tax. This would be the tax rate for a company, but if you are doing it in personal names then you may pay up to 46% tax. It is best to look a discretionary trust structure to help minimise your tax.
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
Our system of taxation is self assessment which means if you get it wrong there are penalties. If you're selling new houses (which includes houses less than 5 years old that haven't been sold before) you are building – your turnover would require you to be registered for GST. The ATO gets land transfer information etc etc. What if you're telling someone this is what you do but you only pay capital gains tax, are you sure they or someone else won't let the ATO know.
If you're going to develop then you should do that in a different entity so that your actions as a developer don't opvershadow your long term investment properties.
Thank you Terry and crj for the feedback, much appreciated!
Ok, I need to learn more about trusts, entities and GST then meet with a good accountant…are there any good books I could read to familiarise myself with before I meet with an accountant?….or maybe other sources of info that will help
My ultimate goal is to own a property portfolio completely debt free, using developing as the tool to speed up the process and pay off the debt.
all comments are welcomed
Are you able to pay GST as an individual or do you have to set it up in a company name?
Fred
anyone can pay GST. if you were to purchase a new house GST would be included in the price – same as if you were to buy a car or TV etc. Personal or company don't matter.
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
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