Clarification on CGT

[MTR]

Hi All
can anyone help with this.

I sold a couple of properties last year and my accountant advised that if I continue to trade properties the ATO will flag this and it will be seen as business and ATO will not allow 50% discount.

Am sure this has been discussed somewhere on SS but can someone clarify how this works and my options.

Cheers, MTR

 

[Propertunity]

.... my accountant advised that if I continue to trade properties the ATO will flag this and it will be seen as business and ATO will not allow 50% discount.

Your accountant is right, the ATO may class you as a property trader.

So under your previous arrangement your options were to buy, reno, hold for 12 months min & sell presumably? And you paid CGT at your marginal tax rate on profit - less the 50% discount.

Under the 'new' scenario the properties become trading stock. You buy, you value add, you sell, you pay tax on the profits at your marginal tax rate. I suppose you could do the trading in a Pty Ltd company and then you only pay company tax rates?

Ask your accountant. There may be other alternatives available to you.

 

[MTR]

Thanks Propertyunity
seeing the accountant tonight about this.

Cheers, MTR

 

[Ausprop]

you also need to register and charge for GST (if renovating or developing).

often you are better off doing buy'n'die than trading - traders need to turnover a lot morew than BnD to achieve the same after tax result

 

[MTR]

Hi Aus
Tax is a killer.

With the current development I can see a profit of around $180K-200K, I think it is worth giving it a shot. Met up with the accountant and could look at reducing tax to 30% overall, she also mentioned if need be use SMSF as another option.

Cheers, MTR