cap gains tax. can associated deve costs reduce tax.

[Blair007]

Hi all

I have a site in melbourne which i have been trying to get permits for 4 townhouses. It looks like it is going to be a bit of a mission to get this so i am reconsidering my options

Option 1 - sell site as is.

With option 1 rough figures are it cost me

450 purchase price
22 stamps/legals
8 buyers agent fee
20 development costs, plans reports etc

The site has seen growth over last 9months i could sell site for 500-520 which after selling costs i would be approx break even.

My question is can i use all those associated costs to offset my capital gain on the site to basically pay no cap gain tax.

Option 2 is more or less the same question as the first scenario except ill try get permits for a 3 townhouse site. Development costs will prob be an extra 10-15 k and selling price might be an extra 30-50k, i need to speak to some agents about this first.

Cheers
Blair

 

[Paul@PFI]

Ummm no. Your property is not subject to CGT. Its subject to normal income tax and GST. Trading stock principles allow assoc costs to reduce that profit. The Margin Scheme may reduce GST payable on each sale too.

Forget CGT its not going to happen. You really need personal income tax advice by someone who knows property taxes. Your lender will expect it.

 

[Blair007]

Ummm no. Your property is not subject to CGT. Its subject to normal income tax and GST. Trading stock principles allow assoc costs to reduce that profit. The Margin Scheme may reduce GST payable on each sale too.

Forget CGT its not going to happen. You really need personal income tax advice by someone who knows property taxes. Your lender will expect it.

Hi paul. Even if i am not developing the property and either selling the site as is or selling with permits i would still be subject to income tax and gst?

 

[Terry_w]

Hi paul. Even if i am not developing the property and either selling the site as is or selling with permits i would still be subject to income tax and gst?

Yes - a recent case with similar situation confirms

 

[Paul@PFI]

Hi paul. Even if i am not developing the property and either selling the site as is or selling with permits i would still be subject to income tax and gst?

As Terry indicated a similar case in Brisbane had such facts. The original intention was to demo and build./ That never eventuated and the old house was rented for several years. On sale the ATO denied it was a CGT event and argued the intention when it was acquired was to make a profit.

If you just sell the site it may be subject to GST. It may not too. If it is subject to GST then there may be a way to reduce it substantially. I say it all the time - get personal tax advice.