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Capital gain for land

Discussion in 'Accounting & Tax' started by robi, 4th Nov, 2015.

  1. robi

    robi Active Member

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    Please can any one help me I signed a contract for land in VIC in June 14 which is in both me and my wifes name, the land is due to settle in Dec15, it has picked up on price and if I resell now it's makes me 50k in profit .my question is
    1. Can I resell it now and is their any way to avoid stamp duty or shall I wait for it get settled and sell ?
    2. Do I need to pay capital gain on land in vic
    If yes how much in equal shares for 50k profit
    Please show me some light on this
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    1. no way to avoid duty, even if you sell before settlement, but there may be no duty if no profit in VIC - confirm with your lawyer
    2. yes - or just income tax
    profit goes to owners and their % of ownership and added to other income.
     
  3. robi

    robi Active Member

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    So if I make 50k profit then we can deduct stamp duty and Also agent commission and is CGT halfed to 25% on land?insted of 50%
    Thanks
     
  4. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    Provided your intention was to retain the land and it isnt a profit from an isolated transaction and therefore should be on revenue account and not capital account then it will get the 50% cgt discount. Land doesnt get special concessions further than that.
     
  5. wogitalia

    wogitalia Well-Known Member

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    Stamp duty will be added to the cost base of the asset. You are also entitled to include any holding costs (interest, land tax, rates, etc) that have been incurred since you originally purchased the property.

    Given you've held for over 12 months you would be eligible for the CGT discount of 50% as well.

    Land makes no difference to CGT consequences, so no extra discounts or anything.

    Also be double careful of what Mike has mentioned in the previous post, if you are doing this sort of thing with any kind of regularity you might not actually fall under the CGT regime and may in fact be operating a business and caught under normal revenue account rules in which case there would be no discount available.

    So quick calc on the information you've given... 50k profit split 50/50 between the owners is 25k in each name, discounted 50% means an extra 12.5k of assessable income in each return. From there it depends entirely on the assessable income of each person for how much tax would be payable (could be anywhere from nothing, say your wife is a stay at home wife with no other income) or close to 50% for highest income bracket with levy's and the like. As always, you should absolutely be seeing your accountant for specific advise on this front.
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The OP question infers that the intention in selling is to take a profit. That could give rise to a GST and ordinary income tax issue (not a CGT issue) applies to the profit after costs to acquire and sell are allowed for. Stamp duty and other taxes tends to act as a handbrake to people flipping land.

    One manner the ATO would address this is to ask for the DA etc. No DA ?? So your intention was to profit ? You didnt sell due to size etc....Or a relationship ending etc. The onus would be solely yours to satisfy the ATO.
     
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  7. robi

    robi Active Member

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    Hi Paul,
    Only reason is not getting sufficient finance,
    I also have building contract signed and plans drawn also paid deposits even this is been forefitten is this not ok for ATO to prove that this is not my intension it's only the circumstances that change the whole scenario.
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    That may or may not be enough. "Profit"can include reducing debt. Profit intention isnt a test like a business profits test. Its highly subjective. ..ATO don't have to prove jack. The onus is always on the taxpayer. Only way to sleep soundly and have assurance comes with a risk... Apply for binding private ruling with all facts and details and ATO will give their opinion which you are then bound to follow. (Thats the risk - You showed your cards)
     
  9. robi

    robi Active Member

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    Thanks Paul