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profit declared as income?

Discussion in 'Accounting & Tax' started by Fernfurn, 3rd Jul, 2016.

  1. Fernfurn

    Fernfurn Well-Known Member

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    I am retired and live off rental income and If I bought a house after Dec , purely as investment (in other words still live in our own home) renovated it and resold before November the next year (therefore no land tax), could I just add any profit to my income? If so, how would I state this on the tax form?
     
  2. Gockie

    Gockie Be the change you want to see in the world Premium Member

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    I'm not an accountant so wont comment on that. Was thinking though, if you hold the property for at least 12 months your sale will be subject to 50% CGT but if you sell within 12 months you won't have the 50% CGT discount applied. Will the land tax be more or less than your CGT discount?
     
    Last edited: 3rd Jul, 2016
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  3. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Yes it would be treated either as income or a capital gain without the discount. In most cases the result will be the same - but if you have a carried forward capital loss the it would be different. Seek personal tax advice.
     
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  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    This intention of profit making usually means the acquisition is not held as a capital asset. Instead all the "profit" may be taxed.
     
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  5. Weaver

    Weaver Well-Known Member

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    Just to clarify a little further on the CGT discount....

    If I bought a piece of land and built a house on it as an investment (rented out on completion)

    1. would I get a CGT discount if I sold it 12 months after I purchased the land?
    2. Or 12 months after the house was completed and rented out?

    thanks Weaver
     
  6. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    1. possibly
    2. possibly
     
  7. Weaver

    Weaver Well-Known Member

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    thanks - found other discussions with you and Paul that might clarify this one for me...takes a bit of brain power to digest!
     
  8. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    It all depends. If held on captial account the relevant time period is usually the date of the contract to settle on the land.
     
  9. Hamish Blair

    Hamish Blair Well-Known Member

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    Curious as to what counts as profit motive. Doubt many invest to lose money. If developing a site for uplift in value - when is a sale on capital vs revenue account? How soon is a sale income or how much time elapsed before capital gain! Suspect it depends...on what?
     
  10. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Lots of case law on this.

    If you intend to hold and make money from the rents then it is more likely to be capital account.

    If you want to build and quickly sell more likely capital account

    Time is only one factor though.
     
  11. Marg4000

    Marg4000 Well-Known Member

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    You would have to do the calculations.

    No land tax vs a possible 50% reduction in CGT if you held for more than 12 months.
    Marg
     
  12. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    Item 18 - Capital Gains. It seems your property was on capital account BUT as there is no CGT discount for that period of time it wont matter if its shown at 18 or elsewhere in the return.

    If its sold after 12 months (+1 day) the decision to use a CGT discount may (or may not) be correct and personal tax advice should be obtained.