Looking to sub-divide, but what about TAXING of profits

[harrywyborn]

Hi everyone,

Im looking to buy a small acreage in a rural town in north QLD with 2x3 bedroom duplexes on it. Now the acreage may be sub-divide into 16 blocks. I will borrow enough money to pay for everything including one years worth of interest repayments, etc. Now my goal is to sell the blocks of land and keep the 2x3 bedroom duplexes. Just wondering when and how CGT will be accounted for with the sale of the blocks of land. I would like to be able to pay off all my debts with the gross profit before tax is taken out, is this possible. Or would little Jonnie Howard take his share of the profits before i pay any debts off. I was hoping that at the end of the day to walk away with the original loans being paid off with before tax profits, that way i would walk away with 2x3 bedroom duplexes (with nothing oweing on them) and Approx $120k after paying back all debts before tax.

is there anyone who might be able to advise me on this matter please.

[DaleGG]

Hi Andrew

I suspect that CGT will not apply to this activity. Instead, the profits will be taxed as business income, but, only after all allowable tax deductions have first been deducted.

Unfortunately though, the debt reduction will not reduce the profit and hence tax will come out of the higher figures.

Dale

[Bill.L]

Hi harrywyborn,

Before you go ahead with this plan, have you checked the demand in the "small rural town" for the small blocks of land??? They can sometimes be very difficult to sell unless the town is growing.

bye

[harrywyborn]

Thanks Guys,

After now determing that i will be taxed on the full profits minus any allowable deductions. The venture will not be as profitable as once thought. Also what are allowable deductions for property developing?????

Also land is in demand as surrounding towns are way too pricy even for some of the rich and famous. $1.8mil will buy a 700m2 block on the beach front. The town is 20 min away from popular tourist destionation. Hence people are being pushed in land to more affordable properties.

Thank you for your comments. Im very keen to learn as much as i can form anyone who will teach.

[DaleGG]

Hi Andrew

Ah, that is an interesting question indeed.... "what are allowable deductions..."

the answer is simply any money spent in earning your income so long as it is not private in nature or capital in nature.

What it really means is "just about anything you can imagine" such as alcohol, chocolate, movies, books, etc etc.

The secret lies in finding ways to explain a cost as an allowable tax deduction.

If you open your mind to the idea properly, you will see that there are endless opportunities.

Good luck and have fun

Dale

[Thommo]

Hi Andrew

Ah, that is an interesting question indeed.... "what are allowable deductions..."

the answer is simply any money spent in earning your income so long as it is not private in nature or capital in nature.

What it really means is "just about anything you can imagine" such as alcohol, chocolate, movies, books, etc etc.

The secret lies in finding ways to explain a cost as an allowable tax deduction.

If you open your mind to the idea properly, you will see that there are endless opportunities.

Good luck and have fun

Dale
But you must always remember that the ATO are sore losers. "endless opportunities" can also mean "endless audits"

I would accept "the answer is simply any money spent in earning your income so long as it is not private in nature or capital in nature." as true and ignore any incitation (?) to venture into the tax avoidence field.

ps. I believe Dale is an honest practitioner and was not suggesting that you step outside the act.