Tax liabilities on Community Title

Discussion in 'Accounting & Tax' started by Anthony Johnston, 26th Oct, 2015.

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  1. Anthony Johnston

    Anthony Johnston New Member

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    Hi, I am looking at setting up a Community title for a block of land in NSW and have been told that if I was to sell off smaller blocks (which is possible & with neighbouring precedent) I would be required to pay corporate tax on each block's sale, rather than pay based on the P&L of the trust that would own and run the land. Any info would be much appreciated.
     
    Anthony Johnston, 26th Oct, 2015
    #1
  2. Paul@PAS

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

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    The owner of any land that is sold may be liable for GST, land tax and taxes on profits if some is sold.

    I don't follow the post.
     
    Paul@PAS, 26th Oct, 2015
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  3. Anthony Johnston

    Anthony Johnston New Member

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    Hi Paul,

    Thanks for your reply.

    A bit more info...on the property (130 acres) there can be up to a 1/3 of the land developed under Community Title. Looks like up to 13 blocks can be sold as part of that 1/3, whilst still sitting under Community Title for shared services etc.

    My question is whether tax needs to be paid against the sale of each piece of land (i.e. 13 x tax on profit from sale of each parcel) or whether tax is paid against the overall financial year P&L of the business, whereby sales minus costs etc. = the profit that is taxable. I understand this is as per normal but have been told we would have to pay tax against profit each time a block is sold...

    Hope that makes more sense.

    Thanks,
    Anthony
     
    Anthony Johnston, 26th Oct, 2015
    #3
  4. Paul@PAS

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

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    The land is trading stock of the company. So sales value (net of GST) is income and that income will be reduced by the cost of good sold for the land. That's the company gross profit. Then deduct overheads and other deductions = net profit etc. When sold the company produces a profit and tax paid at year end. Actually its payable when lodgement is due which may be as late as the following May if you use a tax agent. You don't have to prepay tax or account for lot by lot. Given the extent of issues accounting for profit, GST etc its worth ensuring you and your accountant are on same page so nothing is overlooked...Like margin scheme ?

    When sold the GST is reported and paid in that quarter / month when settlement occurs. Costs to develop may also give rise to GST credits to claim.
     
    Paul@PAS, 29th Oct, 2015
    #4