Tax Implications - New Construction

Hi,

I'd appreciate input and clarification on the following.

Background:

I have a block of land that I have built a property. Initially, my intention was to sell but I also have the option to rent it out.

As an FYI, I am a PAYG salary earner with no other investment property interests.

My Understandings / Clarifications Needed:

My understanding based on the Steele case is that I can claim the interest on the construction if the intent is to rent it out within a reasonable time period, correct? If so, does this rule also apply if you sell it upon completion as well?

Furthermore, is it a general rule that if our intention is to build and sell, then you would be classed as a developer, therefore unable to class the profit made from the sale as capital gains (and unable to claim the 50% deduction if held more than 1 year), instead being classed as income, and also liable to GST implications?

Many thanks in advance.
 
It all depends on the circumstances.

GST is generally only applicable to residential property when it is sold for the first time.
 
Hi,

I'd appreciate input and clarification on the following.

Background:

I have a block of land that I have built a property. Initially, my intention was to sell but I also have the option to rent it out.

As an FYI, I am a PAYG salary earner with no other investment property interests.

My Understandings / Clarifications Needed:

My understanding based on the Steele case is that I can claim the interest on the construction if the intent is to rent it out within a reasonable time period, correct? If so, does this rule also apply if you sell it upon completion as well?

Furthermore, is it a general rule that if our intention is to build and sell, then you would be classed as a developer, therefore unable to class the profit made from the sale as capital gains (and unable to claim the 50% deduction if held more than 1 year), instead being classed as income, and also liable to GST implications?

Many thanks in advance.

Steele's case determined that loan interest is deductible from the commencement of construction where the intent is to subsequently use the premises to earn assessable rental income. So to answer your question about sale - No. Steele's case provides no basis for deduction.

However personal tax advice may offer an alternative. If you construct to sell the loan interest and some other costs may be deductible as you go. Other costs are deferred and used to calculate the profit on sale when it is contracted for sale. And yes you are correct - No CGT issue. Its a revenue issue.
 
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