Cap Gains on Quick Renos?



From: Simon St John

Hi everyone!

One question about buy/reno/sell that I am unclear about is bank financing and the cap gain situation.

I gather if you are trading property in this way you have to pay CGT?

How is this calculated (eg: Say you purchase at $150K, reno for $25K and sell for $220K)

Also, how do people structure their finance - just a mortgage of choice (excuse the pun!) that allows for early repayment. How do banks view people who "turn over" finance within 1-3 months in this way.

Cheers, Simon
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Reply: 1
From: Robert Forward

Hi Simon,

Those that trade properties will do so usually in a company or trusts name. It won't be in their own name due to the CGT.

If you do this as a business then it's seen by the ATO as a business trading venture and thus taxable at company rates, visa versa, CGT for companies is only 30% anyway. You just don't get the deduction allowance after the first 12 months.

And the banks, they don't seem to have a problem cause most people that trade properties will also have a number of buy and hold properties that the bank has a mortgage over anyway. The bank will see this trading as an income/cashflow for the business and will lend on that value too.

Anyway, just my thoughts on what I'm doing.


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Reply: 1.1
From: Simon St John

Thanks Robert!

Much appreciated,

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Reply: 1.1.1
From: Owen .


I kind of forced the issue with my bank as I did a buy/reno/refinance/hold recently which they did quite happily. I immediately asked for more money to do a buy/reno/sell and they weren't that happy it so they gave me a large LOC instead that will hold the whole capacity of the purchase and reno. This way there will be much less paperwork for them and I will have the availability of funds I need. I asked for this originally and they had said No. Did it anyway and they have now come to the party.


"Gambling promises the poor what property performs for the rich – something for nothing"
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Reply: 1.1.2
From: J Parker

Hi Rob!,

Further to that question... when does the ATO classify it as a business? For example, if I was to buy/reno/sell in a short period (less than 3 mths) once or twice a year, is it seen as a business?
Because I earn very little, wouldn't it be better for me to do this in my own name, as I pay very little tax anyway? What benefit (if any) would a trust be in this situation?
Cheers, Jacque :)
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