Another Captial GainsTax question

[somersoftfan]

I searched the forum but couldn?t find similar question asked anywhere.

I have exchanged contract for a land purchase in Oct 2014. Land settles in July 2015.

If I sell the land in Nov 2015, my understanding is that I have to pay capital gains tax for 50% of the profit made?

But what is the rule if I build a house and sell it in Nov 2015? Would the same rule applies?

 

[jrc]

You need to get advice based on your circumstances. Yes, as a genal rule younacquire the land when the contract is entered into unless the contract is subject to a condition precedent. However, your purpose of purchase might affect whether the purchase is on capital or income account eg if you intended to buy, build and sell even if it is a one-off occurrence, it is likely that your profit on the land is not eligible for the 50% discount. If you built a house and sold the house quickly then it is likely that at least the profit on the house would be income not capital gsins and you would also likely have to pay GST.

Get professional advice.

 

[Terry_w]

Also rules are different where the house will be the main residence.

 

[Rob G.]

But what is the rule if I build a house and sell it in Nov 2015? Would the same rule applies?

The construction of a dwelling would not usually be treated as a separate CGT asset from the land.

However, the short term purchase, construction and sale could represent profits of a business developer or a speculator and be treated as ordinary income.

Therefore your 50% general CGT discount may be useless.

It depends very much on individual facts.

 

[Paul@PFI]

And GST could also be a concern. The ATO don't seek repetition...One instance may be sufficient if the intent was to build and sell or develop with a view to profit or reducing debt.

Might be worth seeking advice so you use the right strategies. I always say underpaying and overpaying tax are equally wrong. If you choose the right strategies you may reduce the GST impact.