Developing & CGT

[MTR]

Currently developing 3 villas and not sure but possibly selling all.

My builder mentioned that if I just sold one villas I would not have to pay CGT because the cost of land etc would come off that sale, therefore I would not be showing a profit, no CGT. This is what he does with his developments, always sells one and does not pay CGT.

My understanding is that all the costs would be distributed proportionally, and this makes sense. Is this correct???

I have now spoken to a couple of developers who do various things to reduce tax, whether they are correct or not is another issue, its a minefield.

Thanks
MTR

 

[MRO]

Dont get tax advice from a builder. He is wrong and your understanding of apportioning costs is correct.

 

[Rob G.]

Apportion cost on a reasonable basis.

 

[sanj]

Not only is the apportionment wrong but most likely there won't be any CGT payable either

 

[MTR]

I know a few doing things creatively, the problem is all good and well while you are cashing in the money, but if you come unstuck it could cost dearly, also I am sure penalties will apply.

 

[MTR]

Apportion cost on a reasonable basis.

that's also a vague/grey though, what does ATO consider REASONABLE my idea of reasonable my be different from ATO, this should be clearly defined.

 

[Brady]

Without knowing just using common sense.

You couldnt just apply the income of 1 villa and the cost of the WHOLE site.

Yes the land cost you, but if you have split it into 4 my thought is apportioning 1/4 of the land costs.

 

[MTR]

Without knowing just using common sense.

You couldnt just apply the income of 1 villa and the cost of the WHOLE site.

Yes the land cost you, but if you have split it into 4 my thought is apportioning 1/4 of the land costs.

Your right, its common sense, perhaps some developers have this. I guess got to play by the ATO rules unfortunately

 

[westminster]

Currently developing 3 villas and not sure but possibly selling all.

My builder mentioned that if I just sold one villas I would not have to pay CGT because the cost of land etc would come off that sale, therefore I would not be showing a profit, no CGT. This is what he does with his developments, always sells one and does not pay CGT.

My understanding is that all the costs would be distributed proportionally, and this makes sense. Is this correct???

I have now spoken to a couple of developers who do various things to reduce tax, whether they are correct or not is another issue, its a minefield.

Thanks
MTR

I reckon your builder is going to be up **** creek one day. He may say it works because he's never been audited but that is seriously wrong way of doing it.

Stick on the right side of the ATO and you'll be fine.

 

[Brady]

Agreed happy to stay on the right side with the ATO.

 

[Ausprop]

My builder mentioned that if I just sold one villas I would not have to pay CGT because the cost of land etc would come off that sale, therefore I would not be showing a profit, no CGT. This is what he does with his developments, always sells one and does not pay CGT.

that's so seriously wrong that he may as well just submit a tax return with 'get stuffed' scrawled across it

 

[MTR]

that's so seriously wrong that he may as well just submit a tax return with 'get stuffed' scrawled across it

That's funny Ausp

It's like anything if you want to take the risk go ahead, but their will be consequences to pay if you get caught.

I agree with everyone here. I am just shocked that someone who operates a building company and is a developer is actually recommending this.

It was also this week that I was chatting to another developer highly successful owner/re agent from Sydney and he was pretty much saying the same, OK so there are plenty out there prepared to take a risk. wow.

 

[Rob G.]

that's also a vague/grey though, what does ATO consider REASONABLE my idea of reasonable my be different from ATO, this should be clearly defined.

Utter nonsense.

'Reasonable' in these circumstances cannot be clearly defined as a legal definition. It depends upon individual circumstances.

By giving 'reasonable' a clear bright line definition then it would hamper the court's ability to interpret. This would play into the hands of promoters of tax avoidance schemes.

Anyway, if the Commissioner amends your assessment to what he considers reasonable then it is deemed to be a correct assessment. You must not only show that it is incorrect, but that your version is the best view.

Not only that, but the 'reasonably arguable position' is required as a higher duty for larger tax shortfalls, otherwise penalties may apply even if you have used 'reasonable care' in preparing your tax return.

You would be unlikely to be using reasonable care by relying on a builder for tax advice.

 

[MTR]

Utter nonsense.

'Reasonable' in these circumstances cannot be clearly defined as a legal definition. It depends upon individual circumstances.

By giving 'reasonable' a clear bright line definition then it would hamper the court's ability to interpret. This would play into the hands of promoters of tax avoidance schemes.

Anyway, if the Commissioner amends your assessment to what he considers reasonable then it is deemed to be a correct assessment. You must not only show that it is incorrect, but that your version is the best view.

Not only that, but the 'reasonably arguable position' is required as a higher duty for larger tax shortfalls, otherwise penalties may apply even if you have used 'reasonable care' in preparing your tax return.

You would be unlikely to be using reasonable care by relying on a builder for tax advice.

Got it.
I don't plan to be in this scenario anytime soon.

Thanks
MTR

 

[Paul@PFI]

Currently developing 3 villas and not sure but possibly selling all.

I have now spoken to a couple of developers who do various things to reduce tax, whether they are correct or not is another issue, its a minefield.

Thanks
MTR

The thing about tax liabilities is you actually cannot legally reduce them. Its a mistake most people make. A tax liability is a fact. If you overpay you are a certain idiot. Most taxpayers have no idea if they are overpaying - They fear underpaying. That's just as dumb as underpaying in my book - Its not like any of these "Treasurers" invest it wisely. Also if you underpay you are a idiot waiting for it to be corrected. Its gonna happen one day.

By paying no more and no less tax then is expected you sleep soundly. Tax case law if filled with taxpayers who tried to illegally reduce their liability. Some foolish, some stupid, some through bad advice they hoped would work. Some reckless, Some fraudulently.

Penalties are often monetary. Plus elevated penalties + interest. Gaol is also on the cards. Plenty of astute business people go to gaol for tax offences.

 

[BLTN]

I reckon your builder is going to be up **** creek one day. He may say it works because he's never been audited but that is seriously wrong way of doing it.

Thinking the same thing - he would be completely and utterly screwed. Tax bill would be in the hundreds of thousands, possibly into the millions depending on how many he's done.

How is this not picked up though?? This isn't like claiming a few 'dodgy' deductions - this is literally dodging hundreds of thousands of dollars! You think the ATO would have some red flags for these kinds of things.

 

[Paul@PFI]

Its just as criminal as a one hit punch. Not as blatant. Just as honest as a bank robber. At least they have the guts to go on camera.

You and I pay for his theft. Its why I love it when speed camera flashes. Its me saving money when some dumb **** drives through the lights at 80km in a 60 zone.

ATO eventually get an anon dob-in mail on their website and down he goes. Sometimes they are also just all air. Big mouth + no brain. Struggling to make a profit and its their way of explaining. The figjam profiteer.
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