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本帖最后由 jeff_lawsons 于 2014-1-21 16:40 编辑
If the existing property is your Principle Place of Residency, then you need to get valuations just before demolish, in order to keep property records of the cost base for CGT purposes.
If you intend to demolish your existing property and replace it with two new residential units, one of which you will keep and the remainder will be held to receive rent, then the tax implication is quite straightforward.
Expenses that are deductible: Telephone, Stamps, Stationery, Insurance, Advertising, Agent Commissions (regarding lease, not buying and selling), Interest Expense and Borrowing Expenses (apportionment is likely required), Division 43 deduction (Building improvements), and Division 40 deduction (Depreciation)
Expenses that form part of the cost base of the property: Architect Expense, demolition costs and construction costs.
However if the remainder will be sold instead of holding for investment purpose, then there are three ways profit from property sales can be treated for taxation purposes:
1. Assessable ordinary income if you were carrying on a business of property development
2. assessable ordinary income if you conducted an isolated commercial transaction with a view to a profit,
3. statutory income under the capital gains tax legislation- mere realisation of a capital asset.
1. Carrying on a business of property development
The question of whether a business is being carried on is a question of fact and degree. In determining whether a taxpayer is carrying on a business, no one indicator will be decisive. (refer to Taxation Ruling TR 97/11)
If you have no prior history of being involved in property development, you did not have a business plan and the development was a once off arrangement, the size and scale of the development is relatively small and the expected profit will be modest.
Then most likely you are not carrying on a business of property development and the income derived from the selling of the unit is not ordinary income.
But if you are carrying on a business of property development, you are required to be registered for GST since your projected GST turnover will most likely be above the GST registration threshold ($75K). You need to charge GST on the sale but you are able to claim input taxed credits on the acquisitions (such as GST paid to builder, etc.)
2. Isolated transaction with a view to a profit
Profits on an isolated transaction will be ordinary income when (Taxation Ruling TR 92/3) :
• the intention or purpose of a taxpayer in entering into the transaction was to make a profit or gain; and
• the transaction was entered into, and the profit was made in the course of carrying on a business operation or commercial transaction.
If your initial intention (objective consideration of the facts and circumstances) is to build and sell, instead of holding for long term investment, it would be reasonable to conclude that a significant purpose in undertaking the development is to make a profit or gain.
However at the time of demolishing and building the property you intended to hold the property for long term investment and the property was actually rented out for a period after it was constructed, and you subsequently decided to sell the finished unit due to some reasons (such as financial pressure of holding the unit). Then any profit or gain from the sale of the unit is not assessable as income from an isolated transaction.
If you enter into an isolated transaction with a view to a profit, then you are carrying on an enterprise and you are required to be registered for GST. You need to charge GST on the sale. However, where the new unit is to be leased for a period of at least five years since it was built, the sale of the new unit will be input taxed and GST will not be payable on the sale.
3. Mere realisation of a capital asset.
If none of 1 or 2 above applies, then any gain or loss you made on the disposal of unit is on capital account and the gain or loss will subject to CGT provisions.
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