Hi, just wondering if someone can shed some light on the tax payable when building then selling spec homes.
As an example let's say (rough figures):
$180,000 for the land
$170,000 for the house
$350,000
And then there's all the other costs (rough figures again):
$5,000 Stamp duty on land purchase
$20,000 Bank interest during construction
$5,000 Bank interest while trying to sell it
$2,000 Borrowing costs (valuation, loan app. fee, gov. duty etc)
$1,000 Construction loan fees / monthly account keeping fees
$2,000 Council rates
$2,000 solicitors (buying land and then selling house)
$13,000 real estate agent's commission
$50,000
So the total cost to buy the land, build a house and then sell it (including fees and interest etc) would be say $400,000.
If the house was to sell for $450,000 that would be a real net profit of $50,000
Is this the way the ATO sees it? Or are there some things which are not considered in the total cost, therefore increasing the capital gain. For example if the agents commission is not considered then the total cost would become $387,000 and then the profit would become $63,000 - making the tax bill more. I'm also unclear about expenses incurred after construction while trying to sell, like the interest, insurance, rates etc.
Thanks in advance, Craig.
As an example let's say (rough figures):
$180,000 for the land
$170,000 for the house
$350,000
And then there's all the other costs (rough figures again):
$5,000 Stamp duty on land purchase
$20,000 Bank interest during construction
$5,000 Bank interest while trying to sell it
$2,000 Borrowing costs (valuation, loan app. fee, gov. duty etc)
$1,000 Construction loan fees / monthly account keeping fees
$2,000 Council rates
$2,000 solicitors (buying land and then selling house)
$13,000 real estate agent's commission
$50,000
So the total cost to buy the land, build a house and then sell it (including fees and interest etc) would be say $400,000.
If the house was to sell for $450,000 that would be a real net profit of $50,000
Is this the way the ATO sees it? Or are there some things which are not considered in the total cost, therefore increasing the capital gain. For example if the agents commission is not considered then the total cost would become $387,000 and then the profit would become $63,000 - making the tax bill more. I'm also unclear about expenses incurred after construction while trying to sell, like the interest, insurance, rates etc.
Thanks in advance, Craig.