I want to sell some house and land packages in Victoria and approximate profit is 30k per house and then use that profit to put toward building a new house and land to rent out as an investment property. Could I deduct the profit as an expense on the investment property and there fore avoid paying any capital gains tax? Looking for a good property accountant in melbourne to. Hope you guys can help. I want to get creative with my accounting.
Hmmm…….Profit is profit ie income NOT an expense.
Good news! On your scenario you will be taxed as adeveloper, so no capital gains tax, you will just be taxed on everything you make. Don;'t forget GST either.
Where can I find out about developers tax. That’s good info to know. Is there a better make to use your gains as expenses and not make a so called profit in the tax mans eyes.
are you listening? Profit is not an expense.
A capital gain is the difference between the sale price & your purchase cost + development costs + gst. This is taxable as either profit or income, it is not an expense.
There is no development tax, only tax on profit whether this is at the corporate rate of 30% or at your marginal rate of tax.Hint: see an accountant before you end up making BIG losses.
On an expected profit of $30,000 you will find that the real profit is nil so you may not have any tax to worry about.
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
sounds worthwhile.
In fairy land –
I would like to be able to claim capital loss against other forms of income due to capital gain being added to other income but that only exist in a FAIR and LOGICAL tax system of fairy land.In fairy land I would also like GST not to be charged on Fuel Tax (Fuel excise) and state stamp duty would be covered by federal GST credits as promised rather than by property purchasers.
Duckster ,
See my post on CGT and income posted earlier today
There maybe a fairyland… I am a Stocks person who has just moved into the property world
1. Grab your CGT liability from the property you have just sold (or will sell)
2. Buy investments such as Hi-Notes
3. Basically you are buying options on hoping a share price of a stock such as NAB, RIO, 100 of others stay at the same price (or goes higher).
4. Now if they go done you have to buy these at theend of the term at a new lower price so there is risk you could lose some capital.
BUT HERE IS THE FAIRY DUST
A. iF YOU LOSE ANY MONEY OFFSET AGAINST THE CAPITAL GAIN YOU WERE GOING TO HAVE TO PAY ANYWAY. SO YOU HAVE LOST NOTHING.
B. INVESTMENT HOUSES PAY WAY OVERT HE ODDS IN INTEREST TO HOLD YOUR MONEY FOR A FINITE TIME – TO INVEST IN OTHER ALTERNATIVES TO OFFSET THEIR RISK ON THEIR POSITION ON STOCKS. so they may pay you interest of between 10% – 45% for that priveldge.But your iisk is already covered by the CGT you have to pay as part of selling a property.
eg… $50,000 Captial Gain Liabilty from the sale of a $600,000 IP.
Invest $100,000 of the Sale (profit) in 4 or 5 companies with Hi Notes earn $20K to $30K in interest with 2 scenarios happening as well. (sell in July and you have 12 months to enact before you have to pay the Tax man the CGT)
1. No Capital Loss of HiNotes (Shere prices stayed same or went up) You still pay Taxman $50,000 CGT
2. Capital Loss of some description with $50,000 margin of leverage. That is if your NAB, RIO and 3 other stocks plummet beyond 50% you are now starting to conceptually be adding to your total loss for the tax year. Very Very unlikely (then again who saw the Global Crisis coming). And what if it did and you lost upto $60,000 well you just made $20,000 in interest and pay the extra $10K loss out and you still have earn't 10% on the 100K, Simplistic, but you should get the conceptNow like anything…. there is risk and speak to your advisor etc. etc. etc.
Cheers
Tim
(I have no pearls of wisdom)
Ummm you’re confusing offsetting a taxable capital gain with a later capital loss (in the same fy – I’d have to get the bean counter to confirm that absolute timeframe is not an issue here) with income from interest. What’s new about investing you gain until the tax is otherwise due?
to tdorgan. why on earth would you want to spend real money in order to lose it so you don't have to pay as much CGT on the money you made? And if you;re talking about uncovered options this a volitile and very high risk transaction – not for the average investor who want to minimize CGT…..
Dear Scottt… and v8ghia
I'm completely aware of Shares vs Property investores every day of my life….
Don't want tot get in a war or words… I am comfortable in understanding derivatives and options on the share marlet side of the ledger.
I only propose that there are are opportunities that some (not you in particular may want to explore) that can exploit legally. once you have maximises the a CGT liability you have to pay. (in other words money that leaves your control to another – the ATO. Then if there is a legal mechanism to claws back that money and turns it into income to you . Then I would investigate
I'll be honest , and frank, without being judgemental, research it before you completely dismiss (I'm being polite).v8ghia, with repect, more than happy to chat off line.. your comment tells me you have misunderstood the message, go to tje link I have provided in the post earlier today and read the fundamentals of options (Hi Notes in particular) that will give you the parameters for the risk. I, to ensure that intentially made it more risk aware to ensure that I was not misleading anybody
I have no agenda or interest, do your own research (then comment)
Regards
Tim
(I have no pearls of wisdom)
Sorry I take that back……. don't invest in what you don't understand.
hello friends .. i am new here and this is very interesting for me..keep on posting nice stuff thanks Hi MelbGuru & All
Must toss in my 10 cents.
First of all CRJ is correct,
NO CGT as the land is trading stock for a developer, However if you decide to hold the profit in the last one or several properties as an investment rather than buying a separate property – you can rent them out and gear them to provide any cash you might need. This way you benefit from holding the savings on development (the profit on build), you save stamp duty and commissions on any new purchase. And if you hold them for > 5 years you save the GST.
BUT, dont do it in a company as your lose the 50% CGT discount – do it in a unit trust or perhaps a SMSF or maybe both but be aware – for a SMSF – vacant land and the LVR's are more challenging for finance.
Remember – Its all in the planning . . . . Make sure you can see your exit clearly and in detail before you enter !.
Good LuckAnthony @ A4Companies
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