Optimize tax on subdivision

Discussion in 'Accounting & Tax' started by Rayg, 3rd May, 2022.

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  1. Rayg

    Rayg New Member

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    Hi Team,

    I have done a land subdivision, despite the numbers looked good at the beginning, seems like tax man takes half of it. GST (margin scheme) and Income tax (purchased in trust). Any legal ways to minimize the tax bill?
     
    Rayg, 3rd May, 2022
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes plenty
     
    Terry_w, 3rd May, 2022
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  3. Rayg

    Rayg New Member

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    That's not helpful :D
     
    Rayg, 3rd May, 2022
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  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It answered your question though. You will need individual advice - or the trustee will. It would want to make sure it is claiming all relevant deductions and then consider the distribution of the income. Tax could be capped at 25% potentially
     
    Terry_w, 3rd May, 2022
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  5. Paul@PAS

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

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    A trust wont (or shouldnt) pay tax. GST under the margin scheme isnt applied to profit but affects profit. Ironically the more you save under the MS the more income tax that gets paid. Literally save $1 of GST and pay tax on $1. I always suggest to clients the ATO is your silent partner since they often get a first and fixed share of up to 35% or more. And you can lose money and they still get the GST revenue.

    While minimising tax is a ambitious goal consider if thats a full and final solution or just stalling. Having a company beneficiary may limit tax to 25-30% but it may not be final. Some tax planning BEFORE commencing should have considered this. Do so before 30 June.
     
    Paul@PAS, 3rd May, 2022
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  6. Mike A

    Mike A Well-Known Member

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    there are many ways just need to work through each of the options and do some tax modelling
     
    Mike A, 3rd May, 2022
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  7. Ross Forrester

    Ross Forrester Well-Known Member

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    If you have completed the subdivision a lot of your options are now gone.

    Effectively you could think about making extra super contributions in 2022. You could pay some future costs now in the year where you have a big income.
     
    Ross Forrester, 3rd May, 2022
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  8. Paul@PAS

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

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    Incl catch up contributions if eligible. Its easily missed.

    Common issue I find if tax planning hasnt already occured is assumption that CGT applies and CGT discounts are available. That issue can vastly increase tax v expectations too.

    Prepaying IP loan interest could even be an option but maybe too late for some lenders...Time would be ticking. It comes with a trap as in 2022-23 that property could lose its interest deduction but bringing it fwd may assist a lesser marginal tax rate.
     
    Last edited: 3rd May, 2022
    Paul@PAS, 3rd May, 2022
    #8
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