澳洲Australia property Buy, Renovate then sell... CGT? | Sydney


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


Hello all,

Was wondering if standard CGT ruling applies if you buy, renovate then sell off a property?  

评论
If your intention is to buy, reno and sell then CGT may not apply - it may be income. The property could be treated like trading stock.  

评论
Yeah I read something like that, wasnt very detailed though. Trying to find out a bit more.  

评论
Anyone who has used the above strategy care to share their experience with this? - Cant find much info on it.  

评论
AJ,

You may want to research the tax law.

Definition of trading stock is at s70-10 ITAA 1997
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s70.10.html

Is land trading stock TD 92/124
http://law.ato.gov.au/atolaw/view.htm?locid='TXD/TD92124/NAT/ATO'

1. Land is treated as trading stock for income tax purposes if:

·
it is held for the purpose of resale; and

·
A business activity which involves dealing in land has commenced.

2. Both the required purpose and the business activity must be present before land is treated as trading stock. The business activity is taken to have commenced when a taxpayer embarks on a definite and continuous cycle of operations designed to lead to the sale of the land.

3. It is not necessary that the acquisition of land be repetitive. A single acquisition of land for the purpose of development, subdivision and sale by a business commenced for that purpose would lead to the land being treated as trading stock.Click to expand...
 

评论
BigAJ said: ↑
Anyone who has used the above strategy care to share their experience with this? - Cant find much info on it.Click to expand...
There are LOTS of threads on here on this subject
You need to learn how to use the search function on here or use google search,
site:somersoft.com "search terms you are looking for".

site:somersoft.com "buy reno sell" turns up a LOT.  

评论
Thanks guys. Thats cleared it up a bit.

Thats a good way to search Alan! ta.  

评论
what i dont understand is
if your doing it as a business it goes towards your income and you dont have to pay CGT?
if its your PPOR you dont have to pay CGT or as an income?
if your doing it as an IP you have to pay CGT but get 50% reduced if you hold it for a year?

is this correct?

how do you show how your doing it?
would doing it as an income increase your servicing to purchase more properties?
or the fact your buying and selling so dont have debt again until the next purchase and gaining small amounts of funds in the process for bigger deposits and higher priced houses?

in a buy reno hold refi even though you have the extra equity how is that going to help fund another property if your already at your servicing limit?
can you even access the equity if your at your limit?

would it be that you would be increasing rent, hopefully mortgage hasnt gone up more than rent has so have more cashflow

that you have lower LVR because of the extra renos so your less of a risk meaning they will increase your servicing limit even though you arent earning anymore?  

评论
BMan said: ↑
what i dont understand is
if your doing it as a business it goes towards your income and you dont have to pay CGT?Click to expand...
Correct, you don't pay CGT but you do pay income tax on earnings. Bear in mind you pay CGT only at your marginal tax rate anyway (unless the additional income tips you into the next tax scale.

BMan said: ↑
if its your PPOR you dont have to pay CGT or as an income?Click to expand...
Correct. Your PPOR has special tax status.

BMan said: ↑
if your doing it as an IP you have to pay CGT but get 50% reduced if you hold it for a year?Click to expand...
Yes, correct.

BMan said: ↑
how do you show how your doing it?Click to expand...
As with many things at the ATO, it goes to your "intent" at the outset. Document it.

If you are holding for 12 months to get a 50% CGT discount, then it is not much of a business..... unless perhaps you did one every year for 10 years running.

BMan said: ↑
would doing it as an income increase your servicing to purchase more properties?Click to expand...
It would not think that it would help servicing, but it will help you with the next deposit.

BMan said: ↑
in a buy reno hold refi even though you have the extra equity how is that going to help fund another property if your already at your servicing limit?Click to expand...
If you truely are "at your servicing limit" then you probably won't be getting another IP anytime soon, unless your next purchase is cash flow positive.

BMan said: ↑
can you even access the equity if your at your limit?Click to expand...
Probably not unless you are doing a low doc at a low(er) LVR.

BMan said: ↑
would it be that you would be increasing rent, hopefully mortgage hasnt gone up more than rent has so have more cashflowClick to expand...
Yes, a reno will typically increase the rent also.  

Property Investment

Australia property Selling Hints | Sydney

澳大利亚Hi folks I recall ready somewhere about what are some simple tricks for making your place more attractive during a home open. Im seriously thinking of selling my little pad and want to maximise my efforts. Any hints greatly appreciated. 评论 ...

Property Investment

Australia property Re-zoning | Sydney

澳大利亚What would the chances of a NSW Local Council allowing a community titled development (homes, community buildings, etc) on an area zoned Protected Agricultural land? Does anyone have experience in this area? Looking at the local council LEP, ...