CGT – how

If you are doing it as a business then tax would be payable eventually

Ah, yes GST could be applicable too for the first 5 years that the property when the property is sold.

mmmm, hang on. If you live in a property for more than 12 months you simply comply with the requirements set by the ATO, your entitled to CGT free. You can do this (buy & sell) for the rest of your life CGT free as long as you live in the property for a min of 12 months. GST is applicable to Commercial/industrial property when you sell, not residential. Again, this can be avoided also if the property is leased, no GST is applicable. Now there is a loop-hole here. I just sold a commercial property with no lease, however upon the sale the buyer signed a lease PRIOR to contract date, hence no GST applicable. Loop-holes are not only for the rich to exploit but it's there for the informed.

The ATO uses a test called 'is this normal behaviour" to test the validity of actions by some tax payers.

How many people do you know who legitimately build and sell a property every 12 months?

I would go with the accountant and Terry on this one.

Hi forum

I’m also in awe of the knowledge some of the forum members have and really enjoy reading the replies. Thanks.

Sorry if I’m showing my ignorance here but I have a question about CGT too. I’ve just retired and next year will not have a taxable income so won’t need to lodge a tax return. I plan to sell my existing home. With the cash I plan to buy then renovate and sell another PPOR, holding each time for the required 12 months to qualify for CGT free status. I would like to do this progressively about 3 times. I’m sure I’ll be completely exhausted by then! but hopefully a little better off financially. I know I should ask an accountant but unfortunately I don’t have one now.

So my question is this, how will the ATO assess this if I’m not lodging a tax return? Or, do I have to lodge a return showing no income but just showing the sale of the property? I’m keen to hear your opinions on this strategy. Thanks in advance.

There is no requirement to hold an asset for 12 months to make it CGT free. What you may be thinking of is holding for 12 months to get the 50% CGT reduction.

Main residences are usually CGT free.

The ATO will consider whether you are undertaking a "profit making undertaking or plan". Under s 15-15 of the ITAA97 a profit making plan is viewed as statutory income and therefore assessable as ordinary income, not as a capital gain. This particular section of the income tax act doesn't rely on the need to be "carrying on a business" for such an event to be income. It is called an isolated transaction if your intent is just to make profits turning over your PPR quickly.

If it is purely your intent to make a profit selling a house you declare as your PPR then you are likely skating on thin ice. There is some fundamental case law underpinning this particular issue and you are unlikely to get away with it if the ATO decides to audit. Sounds like the accountant's advice is fundamentally correct but a good accountant would have also given you this background ruling advice as well.