Subdivide and sell land vs build. Thoughts?

Or looking a it in a different way:

Buy +$280k
Closing Cost +$14k
Sell land total cost +$48k
Sell land -$160k
Tax on land (45%) +$78

Total cost $260k for an house now worth $250k

 

My aim is to avoid being classed as ‘carrying on a business activity’, I’d just class myself as a ‘mum and dad investor’. My income comes from a 9-5 job unrelated to building industry. I’ve got an accountant who has advised me on every development project I’ve done, and I certainly recommend persons looking to undertake any development get their own specific tax advice, everyone’s circumstances will be vastly different.

@Luca
You don’t pay 45% tax on the whole value of the land, your figure of $78k above is incorrect.

You pay tax on your PROFIT only, at you marginal income tax rate.

 

@Erica Changes last year have made it a lot harder to not pay GST anymore. Previously the onus was on the person doing the subdivision to self report to the ATO but now there is no choice (at least in WA and I'm pretty sure all other states) that the money is sent to ATO at settlement.

It doesn't matter if you are carrying on a business activity or not - that relates to CGT vs income tax. The creation of land is not residential in purpose and is subject to GST

This is the wording on all WA contracts



More information here https://reiwa.com.au/members/news-a...--withholding-gst-from-property-transactions/

 

Thanks for the info @Westminster

 

The last time I sold land was 2017, I’m obviously out of date!

 

It's definitely something to take into account for your next project. There are a lot of people who have done investments in their personal name and not paid GST that probably should have but as it's a self reporting system it's an easy under the radar transaction.
The ATO got sick and tired of people either not reporting or if a company winding up their $2 company after the transaction and pocketing the money so they've made the selling/settlement transaction a bit more complicated to ensure they get the first bite at the cherry.