Speccies for a living?

D

dheath

Hi all,

I come to a cross roads of life where I am considering a change in direction, have been doing the same type of job for 17 yrs, I love property like nothing else, have a few good holders ($$$ neutral) and some blocks near the beach in SEQ.

I am considering trying to build specs and flipping for my new wage.

I would love to hear any comments or advice from anyone already on this path, any tips would be great too.

Thanks all.

D.
 
well the tax system will love you... you will need to pay GST and will no longer be eligible for CGT reductions, this effectively doubles your tax bill so you need to do at least twice the amount of deals before you break even. So unless you intend to do 3 or 4 times++ vs. what you could do with a job then you wont be achieving anything.
 
Yeah. With 10% GST and 50% CGT on the profits then it doesn't leave much to feed the family.

Cheers,

Bazza
 
Bazza, I think Ausprop's point is that you won't pay 50% CGT, you'll pay FULL CGT because as a "flipper" you're a trader rather than an investor, and the CGT concessions are only available if your properties are an investment rather than "stock turned over in trade". Same could apply if you trade in properties without renovating, eg continually chase the latest return. If you buy and sell properties all the time and are classified as a trader, then properties become your stock rather than an investment asset, and no CGT discount applies.

For the same reason, I believe that developers aren't entitled to CGT discount.

Accountants on the forum may be able to correct me...
 
Mike F said:
Or if you don't have a PPOR, you could move into the new one for a week or so and then be exempt from tax:eek:. Is that right?

Cheers
Mike
Click to expand...

Yes I believe that is correct. You only have to have the electricity, phone, and mail to that address to claim it as a PPOR. But, I would think the tax man would get suspicious if you did it more and once a year?

Cheers,

Bazza
 
ozperp said:
Bazza, I think Ausprop's point is that you won't pay 50% CGT, you'll pay FULL CGT because as a "flipper" you're a trader rather than an investor, and the CGT concessions are only available if your properties are an investment rather than "stock turned over in trade". Same could apply if you trade in properties without renovating, eg continually chase the latest return. If you buy and sell properties all the time and are classified as a trader, then properties become your stock rather than an investment asset, and no CGT discount applies.

For the same reason, I believe that developers aren't entitled to CGT discount.

Accountants on the forum may be able to correct me...
Click to expand...

Hi ozperp,

By 'full CGT' do you mean 100%?

If the house is a PPOR you are exempt from CGT. If not you pay 50% CGT on the profit of the sale - that's how I understand it but I could be wrong?

Cheers,

Bazza
 
As long as you maintain some properties as buy and hold ... you should be able to do some spec building (as long as your intention was to rent them out but your circumstances changed forcing you to sell).

If you buy land which has delayed titles ... by the time you settle and build ... as long as 12 months passes from the signing of the Offer and Acceptance (Perth term) contract is, you should still qualify for the 50% CGT reduction and not have to pay GST (Even if you have to pay GST ... you can get a GST rebate from the GST you pay the buidler for the house).

You may also need to have at least advertised the property for rent prior to your circumstances changing.

I'd suggest you find a property smart accountant and get them to find out the tax implications (often the first thing they tell you is not always true ... get them to research for you).

Good luck
 
casper007 said:
As long as you maintain some properties as buy and hold ... you should be able to do some spec building (as long as your intention was to rent them out but your circumstances changed forcing you to sell).
Click to expand...

I would hate to be having that discussion with the ATO, particularly if it had happened on more than one occasion. Remember that they have stated that a single real estate transaction entered into with the intent of making a profit is considered an enterprise, thus the argument can only be about your intent
 
Bazza said:
You only have to have the electricity, phone, and mail to that address to claim it as a PPOR.
Click to expand...

Or just the electricity - I don't have a landline and I have a PO Box for mail:D.
I suspect changing the electoral role would be a good idea though as another way to prove you were serious.;)

Cheers
Mike
 
I think that some of these suggestions fall on the wrong side of the line between "tax minimisation" and "tax avoidance"...
 
ozperp said:
I think that some of these suggestions fall on the wrong side of the line between "tax minimisation" and "tax avoidance"...
Click to expand...

It is in true Australian spirit to try to minimise tax as much as possible. I have certainly paid more then my fair share over my career and wouldn't feel guilty about reducing tax as much as I legally can.

Maybe you can find more 'like-minded' people at the tax department?

Cheers,

Bazza
 
sparky23 said:
It would be horrendous to get caught out - don't you need to be in residence for 6 months?
Click to expand...

Hi Sparky,

I believe that there is no definite period that you have to live in a house for you to call it your PPOR. It could be three weeks or three months. Obviously, you can't do this to often though.

Cheers,

Bazza
 
Speccies for a living

Thanks, all good advice.

We have already flipped one in 2002 and made super profits, only
lived in it for 6 weeks, bonus (sold very fast!!!).

I am wondering if I can do, say 4 speccies at a time, even paying tax, there might be some good profit left.....

Does anyone know whether you will get the CGT discount if you have held the land for more than 12 months even though you build a new house on it and sell? Is it the land you have to hold for 12months to get the discount?

D.
 
this is becoming a tax focussed thread! there is another thread for which i will post the link that says if the house is newly constructed and you want to claim PPOR exemption then you must live in it for 3 months. here it is

http://www.somersoft.com/forums/showthread.php?t=38068

you will not get a CGT discount for building on land and selling it (irrespective of how long you hold it), furthermore you must register for GST. check out the bantacs website with the excellent free publication 'how not to be a developer'.
 
Ausprop said:
this is becoming a tax focussed thread! there is another thread for which i will post the link that says if the house is newly constructed and you want to claim PPOR exemption then you must live in it for 3 months. here it is

http://www.somersoft.com/forums/showthread.php?t=38068

you will not get a CGT discount for building on land and selling it (irrespective of how long you hold it), furthermore you must register for GST. check out the bantacs website with the excellent free publication 'how not to be a developer'.
Click to expand...

Hi Ausprop,

If you build the house, as many people do, with the intention to live in it as a PPOR then it is exempt from GST and CGT? If you you then decide, for what ever reason, to sell it why should it then be taxed?

Ammended: Just read the linked thread. Ok so this is new building but not if you purhase an existing house and resell.

Cheers,

Bazza
 
yeh not only that, but with PPOR exemptions if you read the ATO website (fun!) it is clear that you need to follow thru with your intentions i.e. must intend to reside there AND actually reside there
 
Again it depends on what the intention is. If it is purely for spec and sell without ever trying to rent it ... then you don't get 50% CGT discount - you pay on the full 100% of capital gain.

As for the contract ... in Perth it is taken from the date on the Offer & Acceptance not the settlement date or the property completion (if building)

Best to see your accountant for more advice ...

Hope this helps
 
Julia covers this 'intention' bit in some detail, including:

"The only problem being proving that your intention was not profit making by sale despite the fact you never carried out the activities you intended. This situation gets worse if you develop or improve the land in someway before selling."

and

"Determining whether you purchased the property for resale
at a profit or some other purpose

Good stuff, this keeps the lawyers in their BMWs. It is simply a question of fact what your intentions were but the circumstances surrounding the events must support your claims. Whether you purchased the property for resale at a profit is a question of your state of mind at the time. The trouble is proving that was your state of mind."

it goes on... http://www.bantacs.com.au/booklets/How_Not_To_Be_A_Developer_Booklet.pdf
 
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