Capital gain tax if selling within 12 months

Discussion in 'Accounting & Tax' started by Scott Townsend, 6th May, 2017.

Join Australia's most dynamic and respected property investment community
  1. Scott Townsend

    Scott Townsend Well-Known Member

    Joined:
    16th Aug, 2015
    Posts:
    124
    Location:
    Perth
    Hi all

    I'm purchasing a property to demo, sub di unde into 2 green titles, then sell each block.

    A real estate agent has said that capital gains tax doubles if selling within 12 months.

    I had never heard of this.

    Would it apply to me as I won't essentially be selling the same property, I'll be selling 2 new properties.

    TIA :)
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,100
    Location:
    Sydney or NSW or Australia
    CGT doesn't double, you don't get the 50% discount.

    Is this going to be considered a business activity which is taxed at your MRT as income?
     
  3. Mike A

    Mike A Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    2,656
    Location:
    UNIVERSE
    sounds like a profit from an isolated transaction.

    cgt doesnt apply. 12 month rule not applicable. fully taxed

    nice to see a real estate agent giving advice in an area they dont practice. wonder if they do root canals as well.
     
    Terry_w likes this.
  4. DaveyB

    DaveyB Well-Known Member

    Joined:
    16th Nov, 2015
    Posts:
    91
    Location:
    Adel
    You pay full CGT at you marginal rate. Could halve after 12 months but in your case unlikely as it may normal revenue income not capita gain given your intent- wouldn't you get a grip on all this before you but a property?

    Anyway it's not 'double' it's just 'not halved
     
  5. Scott Townsend

    Scott Townsend Well-Known Member

    Joined:
    16th Aug, 2015
    Posts:
    124
    Location:
    Perth
    Thanks.

    A friend and myself are going halves as a project. We would be not be purchasing under a business.

    So would the over all capital gains paid just be in relation to my tax bracket at the end of the financial year?

    Many thanks
    Scott
     
  6. Mike A

    Mike A Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    2,656
    Location:
    UNIVERSE
    technically its not a capital gain. its a profit.

    not sure how structured but if 50/50 in his and your names then yes the entire profit will be split and taxed at your marginal tax rates.

    you will have a tax partnership so will need to do a partnership return and profits split between the partners.
     
  7. Mike A

    Mike A Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    2,656
    Location:
    UNIVERSE
    lots of issues to consider as well which a lawyer like terryw could advise

    i think more legal issues to consider than anything. what if you have a dispute and one wants out for whatever reason ?

    would the project be put on hold ?

    say one party gets divorced and needs the proceeds to pay for the divorce settlement before things are approved. will you end up with a forced sale before completion ?

    all legal issues that you dont want to have happen but ive seen happen so many times its scary.
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,100
    Location:
    Sydney or NSW or Australia
    Only if a client wants to sell a ****** canal :p
     
  9. Scott Townsend

    Scott Townsend Well-Known Member

    Joined:
    16th Aug, 2015
    Posts:
    124
    Location:
    Perth
    Thanks Dave - I think "getting a grip" is exactly what I'm doing here

    From land settlement date to time of each block potentially settling could be prior to 12 months, could possibly be post 12 months depending on the buyer.

    Would we save tax if the next purchaser didn't settle until after the 12 month mark? Some how I don't think so I think it will still be taxed at out MTR for that financial year
     
  10. DaveyB

    DaveyB Well-Known Member

    Joined:
    16th Nov, 2015
    Posts:
    91
    Location:
    Adel
    It's contract date not settlement, but regardless don't think it's a capital event- pure profit motive- search some threads on that topic fyi
     
    legallyblonde likes this.
  11. Mike A

    Mike A Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    2,656
    Location:
    UNIVERSE
    if the intention was development from the beginning its settlement date. different rules for developers
     
    legallyblonde and Terry_w like this.
  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    CGT = No
    GST = Yes
    Margin scheme to increase profit and reduce GST. Yes BUT conditions apply
    Claiming GST on dev costs - Further conditions

    A tax plan for the developmnet is advised. Otherwise underpaymnet of tax occurs and profit is reduced.
     
    Terry_w likes this.