tax implications for reno & sell

[fernfurn]

If I buy a house and rent it out for 1 year, then reno and sell I know I have to pay 50% of profit to ATO. But what is profit based on, can I claim stamp duty? any renovations? solicitors fees? real estate agents fees?? rates and water rates?

 

[coastymike]

if the original intention was to do a reno and sell when you purchased it may not be eligible for the 50% CGT discount

 

[Propertunity]

If I buy a house and rent it out for 1 year, then reno and sell I know I have to pay 50% of profit to ATO. But what is profit based on, can I claim stamp duty? any renovations? solicitors fees? real estate agents fees?? rates and water rates?

You seem to have confused a few (lot) of things.

Firstly, you only pay CGT (capital gains tax) at your marginal tax rate (which could be 0% or 50% - whatever your rate will be after your profit is added to your wages that financial year).

Secondly, you get a 50% discount on CGT if you hold the property for over 12 months.

The CGT is calculated taking into account all the other costs you mentioned. An accountant will be along shortly to explain how the cost base is calculated.

 

[coastymike]

Propertunity

You don't always get a 50% CGT Discount just for holding a property more than 12 months. It this a profit from an isolated transaction and on revenue account and CGT doesn't need to be considered ? Most important question first.

 

[Propertunity]

Propertunity

You don't always get a 50% CGT Discount just for holding a property more than 12 months. It this a profit from an isolated transaction and on revenue account and CGT doesn't need to be considered ? Most important question first.

Yes, quite right. (too many assumptions on my part).

 

[Paul@PFI]

If I buy a house and rent it out for 1 year, then reno and sell I know I have to pay 50% of profit to ATO. But what is profit based on, can I claim stamp duty? any renovations? solicitors fees? real estate agents fees?? rates and water rates?

These costs will influence the profit that is made by EITHER a CGT or a revenue basis. (They reduce the profit). As Mike said determining if a CGT event applies is the first step in the formula.

I'm not initially convinced either. If you "flip" its likely revenue account.

 

[fernfurn]

yes was thinking of doing this as a money making concern. would be interested in how I could do it with least tax involved considering I own my own home (so couldnt claim it as ppr) and other investment properties as well.

 

[Terry_w]

yes was thinking of doing this as a money making concern. would be interested in how I could do it with least tax involved considering I own my own home (so couldnt claim it as ppr) and other investment properties as well.

You would look at the ownership structure and also at the way the owner holds the property.

I also thought I made a post which didn't appear to get through. If you are doing a 'substantial' renovation GST may apply to the sale as well.

 

[fernfurn]

Terry, is that because it would be classed as a'business' and you are selling a business, therefore gst would apply to the sale? If you have paid gst on all the items you have purchased can you claim that back on tax?

 

[Terry_w]

Terry, is that because it would be classed as a'business' and you are selling a business, therefore gst would apply to the sale? If you have paid gst on all the items you have purchased can you claim that back on tax?

No, that is because GST law says GST applies to new residential properties sold for the first time and substantially renovating an old property could mean it is now 'new'.