Do you factor in CG when pricing up a development?

Intention plays a large part but mere intention is not enough really unless there are steps taken to that end.

One recent case involved a taxpayer arguing that they intended to keep the property long term to rent out on capital account. But on applications to banks and councils they indicated they were doing a short term development with the intention to profit from the sale.

 

are you saying if you had a property for 1+ years it would only apply if you held the finished properties for then 12 months after construction to get the cgt 50% tax/concession?

 

No that's not the case

 

what did you mean by your original reply then? completely understand if my free advice limit is up though

 

There are 3 different ways property could be held
a) capital account
b) isolated transaction
c) trading stock

Only the first gets teh 50% discount and is taxed under the CGT regime, the other 2 are on revenue account and will be taxed as income - a bit like selling pencils

 

and there is no rule about living in a property for 12 months after completion to get the 50% CGT discount. It would generally be from the contract date for the purchase of land

 

Just adding on to what Terry said, the 50% CGT discount applies if you hold (rent) an investment property out for more than 12 months. If you hold the investment property for less than 12 months, you pay full CGT. On the other hand, if you're selling your PPOR, you do not pay any CGT. Regardless of this, a property development project is almost always considered a venture or enterprise and will be subject to GST with the dwellings produced treated as trading stock (or isolated transaction). CGT is therefore not a consideration, rather you need to consider GST and income tax (or company tax, depending on how you've structured your development vehicle).

If you're undertaking a development project, I'd highly recommend getting advice from a qualified tax accountant so that you can factor in GST margin scheme and tax considerations from the outset. Not accounting for GST on sales (and input credits) in the feaso is rookie mistake number 1 that catches out many first-time developers.