Hello All.
I work in real estate and i am currently earning 100K + per year. We do not have any debts apart from an IP we have where the rents covers the loan repayments & our home loan which we only owe $110,000 (The place we live in).
1)
We are planning to purchase a site which can accomodate 5 units and then we plan to sell the units at a later date. There is home on this land which can be rented out untill we build the units. The vendor requires a settelement untill JAN 2011.-Should we setup this project based on a company structure or on our own Names like normal?
– Are there any Tax Benefits for running this project under a company vs a normal name? (PS my fiance is not working atm)
– How much capital gains would we pay if we sold straight away or is there a certain way we can save on CGT?
eg: Renting out the units first and then selling them after 6 months or so?2)
My fiance is renovating a couple of IPs we have. We want to keep one and flip one to have more cash flow plus my fiance wants to do this as work. How Does CGT work on this level? and is there a way we can save on CGT?Any advice would be gratefully appreciated.
Thanks
Johann Psaila – 0451 001 457Work smarter not Harder
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
Hi johann
I can't profess to be an expert on the whole development side of things, but here is my understanding…
1. When you decide to do the whole company structure is entirely up to you, and different people will advise different things. Accountants who charge to set them up will often advise setting them up ASAP, while other investors may advise to hold off on the whole company thing until you've made some money first. Without knowing your whole situation, I'd probably suggest it's time you got your structures underway.
If you set up your structures correctly, there should be some serious tax benefits, assuming you make some serious money from the whole thing. If your fiance isn't working, you should be able to distribute the profits to her until she has as much income as you, and then split the profits from then on. It can get a lot more technical than that, but that would take pages of explanation.
If you build and sell straight away, I think not only are there CGT issues, but GST issues as well. Again, I'm not an accountant either! To get the 50% CGT reduction, I think you have to hold them for at least 12 months, not 6. However, I must admit I have no idea how CGT applies to a new build scenario. The other issue is how many of these you can do before you lose the 50% concession. I think once the ATO sees it as a business, then you may lose that.
2. If you're renovating IPs you've had for a while, then you'll already get that 50% CGT concession unless it's judged to be your fiance's business. As for GST, I believe you've got to do some really serious structural work on an established property for that to have to come into consideration.
Like I said, don't take my word as gospel. I'll be reading the rest of this post too to see how wrong I was!
Andrew
HI Andrew
thanks for your help i cant wait to see other people feedback as well:)
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
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