Howdy
I am meeting with an accountant in a month's time, but I am wondering if anyone can give me an idea in the mean time.
We currently own 2 blocks of land side by side, which we are in the process of subdiving into 4 blocks. We will commence building on the first block later this year, and either sell immediately on completion or rent out for 12 months then sell.
Is it true that we only pay tax on profit above & beyond our build cost? (EG, build for 150 – sell for 250, pay tax on 100k?) I am currently only working part time on a low income since being on maternity leave, so that will also affect CGT ??
We did speak with an accountant prior to purchasing the land regarding the build & CGT but I have been told so many different things by so many different people since then, that's it's not as clear as I thought it was!!
Thanks in advance
If you half own the land on the title the CGT will be split between the joint owners.
As you will only be working part time your annual income if timed correctly will be less for the next financial year and will be added to your annual income to calculate what tax you will end up paying.
BEWARE – this added income is deemed by the family office and Centrelink as income so if you are claiming benefits like parenting payments or CCB it could be affected ! and you may have to pay them back money at the end of the financial yearWhat you also need to be aware of is GST liability when selling new property and may need to be registered for GST so you can claim GST credits for GST paid in the construction of the buildings.Also you may want to ask about margin scheme in regard to GST.
http://www.behanlegal.com/KnowledgeCentre/Taxation/GSTtheMarginScheme/tabid/272/Default.aspxIs it true that we only pay tax on profit above & beyond our build cost? (EG, build for 150 – sell for 250, pay tax on 100k?)
No you have forgotten to take into account the cost base of the land as well as the building cost base !
See
http://www.ato.gov.au/super/content.aspx?menuid=0&doc=/content/00237979.htm&page=72&H72If you are planning to build and sell there may be no CGT, but just income tax instead. This may or may not work out better for you, depending on your situation.
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
Best you get advice on YOUR particular scenario from an accountant who KNOWS property- not just any old accountant. And, yes you will get varying responses from accountants. Get a good one.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
