I did a reno on my home and flipped it....

Most taxpayers would argue that if you and your family live in your home and reno it and then flip it that provided you live in it 3months + its all tax free. Some people seem to habitually move homes doing this. I heard a well known person who promotes this and heard the comment on a TV program.

No tax issue right ??

Hmmm. No.
Read what the ATO thinks here : Your main residence

You're eligible for a full main residence exemption if the dwelling has not been used to produce assessable income – that is, you've not run a business from it, rented it out or flipped it

 

What counts as flipping?

What differentiate it from those who lived in a house for a couple years, reno, sell then upgrade (or any other reason) to a better house/ location, then do it all over again?

 

Spoiler: My latest flip

Still a work in progress.

 

Taxation Determination TD 92/135 states that where the sale of a dwelling gives rise to income under the ordinary income provisions (section 6-5 of the ITAA 1997), that income remains assessable even if a principal residence exemption is available for CGT purposes.

if its a profit from an isolated transaction it might be subject to tax anyway and main residence exemption doesnt apply

 

Not bragging about it on national tv would be a start

I am not a tax expert but if you buy a house with the intention of flipping it for a profit and undertake the enterprise in a business like manner then the sale would not be subject to the CGT exemption. Frequency may also play a part. If you do this every 3 months it's a business.

Alternatively, if you move into a house and genuinely occupy it, live there for a few years then renovate before selling to get a higher price then ATO may not see that as flipping.

 

No need for any business like manner. Not even a requirement to repeat the process.. Once is enough. Repetition is an even more obvious concern.

Isolated profit making intention means its not a CGT asset.

 

Loads of turnover in that area

 

Are you in the business of renovating properties?

 

Agree Paul, this is quite subjective issue. Yet most would unlikely Reno and flip within 3 months...IMO
Purchase process may take 6-8 weeks (contract to settlement), say Reno may take a month or 3 or longer, and then sell process again another 6-8 weeks (contract to settlement), so assuming every 6 months to a year.
I think if someone was silly enough to do it every yearly in the same suburb having same income may become then surprised if they are audited, however if they bought elsewhere eat time, and changed jobs perhaps they can genuinely justify the move?
But I agree, it is not automatically exempt as some people may think.

 

I'm just amazed that anybody could make a proper living "flipping" their PPORs in Australia, even with the CGT exemption. After you factor settlement costs, stamp duty, renovation costs, holding costs, agent commissions, etc I wouldn't think the ATO has much to worry about.
Kind of like park rangers in Kakadu launching a crack down on unauthorised cross country skiiers.

 

One of my clients has been doing this for a living for the past 10 years or so.

 

Agree...I know some people that do it too..... The price variance must be there to justify!
Unlucky me, I dislike moving houses, moved in Australia only two times...and guess what... the second time was to downsize and live there till the end of life....time will tell.
I suppose the older I become my priorities change!

 

I can do Nordic in the Top End? Why do I still get all those guys from Darwin at my local resort then?

 

@Paul@PFI i believe you need good tax advice. If you did a reno on your house and sold you havent flipped it. Im sure you have been living in it for many years. Call me

 

The OP refers to shorter duration as a concern not an established residency. Moving in to live there and promptly commencing renovations differentiate those who reno after a duration as their home. ie as TD 92/135 indicates (albeit over simplified from the perspective of a builder). However that too can be a problem............

If the reno was truly substantial its also possible the main residence exemption can be lost. A well known family on Sydney Harbour did this. Moved out to rented digs while the joint was gutted and 2-3 years later it was completed and quickly listed and sold since they had decided to part ways. ATO argued that they contracted to sell within the 3 months of resuming occupancy so no new main residence exemption applied (and one of them never actually started to reside in any event) and the former residence ceased to apply so the absence rule cant be used. ATO audit decision included reference to the council approval that referred to uninhabitable during construction and a new occupancy cert issued

One of the blind assumptions many have is that their home is always tax free

 

It would be interesting to see the ATO's definition of 'flipping'. The legislation makes no mention of flipping.

 

That's due to not satisfying the three month clause per s118.150, not the substantial nature of the reno, no? Would have been interesting to see the result if they sold after 3 months.

 

Takes its ordinary meaning...whatever that can mean. ATO are just trying to use common expressions that taxpayers are familiar with so they can be more relateable.

I could say I flicked a property and it could mean something like "sale"...Issue is moere in the nature of whether its a ordianry income issue, a main residence, am I conducting a enterprise etc etc.....

 

The media focus and then agent bragging to media (Rear page of Fin review !!) was also a key factor in the audit enquiry I suspect. Agent quoted as saying "the owners have barely moved in and have made a $XXm profit - tax free" or something similar. .Hell hath no fury like a underpaid ATO audit person.

If sold after 3 months one of the owners may have been OK (I still suspect he didnt actually fully reside there and it was never put to the test). Not unusual for audit decisons to adopt a multiple pronged attack and they may have attacked the reno as a isolated profit making too. Again not tested as s118.150 is easier to find failed. The wife never moved in so she had issues for her interest.