Hi all,
I have an accounting related question with regard to a case I?m facing that I?d like some clarity on from a tax perspective.
Person A bought some land many moons ago for $200k.
Person A entered into a JV with XYZ Pty Ltd to develop a block of units on Person A?s land of which each party is to take 50% of the output.
I am concerned with how the JV agreement is worded.
Essentially XYZ is to be taxed on the sale of its output (being 50%) less 100% of the construction and financing costs thereby reducing the profits made in the company.
How would the ATO view this?
Could this potentially fall under Part IVA as this appears to defer the (significant) taxing point to if and when Person A sells their output which would be on Capital account and therefore allow the use of the 50% General CGT discount.
I mention that the CGT event is the significant taxing point because the cost base would be the $200k that was paid for the land.
How much weight does a JV agreement carry with the ATO? Can it determine which party gets taxed on what?
Thanks in advance.
I have an accounting related question with regard to a case I?m facing that I?d like some clarity on from a tax perspective.
Person A bought some land many moons ago for $200k.
Person A entered into a JV with XYZ Pty Ltd to develop a block of units on Person A?s land of which each party is to take 50% of the output.
I am concerned with how the JV agreement is worded.
Essentially XYZ is to be taxed on the sale of its output (being 50%) less 100% of the construction and financing costs thereby reducing the profits made in the company.
How would the ATO view this?
Could this potentially fall under Part IVA as this appears to defer the (significant) taxing point to if and when Person A sells their output which would be on Capital account and therefore allow the use of the 50% General CGT discount.
I mention that the CGT event is the significant taxing point because the cost base would be the $200k that was paid for the land.
How much weight does a JV agreement carry with the ATO? Can it determine which party gets taxed on what?
Thanks in advance.