Hi,

What I should also say is that most businesses fail because they have supply but no demand and need to use debt to fund losses.

What I try to do is let demand drive supply.

In your context, you need to have orders before going down the track and outlaying too much $$$.

As Richmond says, you’ll need a prototype, but sell the concept rather than the product and get some money in to cover R&D costs.

Richmond – mate, that seems like a good client base. Not sure about the wraps dvd though as that is more educational than it is sales related. There would need to be a new angle and I’m not sure the cost warrants the product given the limited demand.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi SIS,

Happy New Year mate!

Drats… I was hoping I wouldn’t be asked that. Sadly, there is no easy or definitive answer (like buy and sell XX properties and you’re a trader).

It’s a matter that needs to be discussed with your tax adviser to determine if you are in the business of buying and selling property.

quote:

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So how do We Distinguish a “Business” from None Business? The Australian Tax Office does not require that a business is making a profit to be a “business” – or that something making a profit is a “business”. It has the following critera for it to be more likely to be “business” if:-

(1)large scale operation and/or
(2)involves employees and/or
(3)frequent acts/transactions and/or
(4)conducted with a view to profit and/or
(5)profitable and/or
(6)conducted over a long period and/or
(7)conducted continuously and systematically and/or
(8)in commercial premises and/or
(9)involves items typically dealt with commercially and/or
(10involves exercise of specialized knowledge and/or
(11)significant capital investment and/or
(12)business records kept and/or
(13)full-time and/or
(14)market research done and/or
(15)associated with other commercial activities of taxpayer and/or
(16)existence of business organization, registered business name and/or
(17)advertising and/or
(18)active –

---

Source:http://www.goldcoastcroquet.com.au/business/Busines1.htm

As you can see… it is not ‘cut and dry’.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi Ivan,

Thanks for your post… welcome to the community and I’m delighted that you are enjoying the book.

I’ve moved your post to property plus as it is more appropriate there.

Sure – I could find 1000 reasons why it won’t work… but the key for any new business is to focus on reasons why it will work.

I think you would be offering a product for a niche market. For example, you may find that you could find great demand in offshore investors who can’t get here to inspect property but would like to have CDs.

My preference is for you to provide the technology direct to real estate agents rather than having to market the CDs too.

It’s always a good idea to value-add, so what else could you do to the property analysis to help the investor? Eg. provide demographics info, median house price data, financial analysis etc.

Be careful to include disclaimers etc. too.

Give it a try and see what happens.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi MC,

Stagefright hey… lol []

Anyway, Simon is right. The cost(s) of selling the property (including legals, agent commission, advertising etc) is all deducted from your ‘profit’ with the balance most likely being taxed as a capital gain.

The only exception is if you are in the business of buying and selling property, in which case there is no CGT as such, it is all taxed as ordinary income. In this case the costs of selling are treated as a normal tax deduction.

In case you are confused, let’s flesh out an example.

Parameters

Property bought for $100,000 (after all costs) and sold 24 months later for $180,000. Sale costs (legals etc.) come to $5,000. Taxpayer is an individual.

Example One – Investor

Sale price: $180,000
Net purchase price: ($100,000)
Profit: $80,000
Reduction in cost base – sale costs: ($5,000)
Adj Profit: $75,000
CG Discount (50%): ($37,500)
Profit to be shown in ITR as Cap Gain: $37,500

This will be taxed at the taxpayers appropriate marginal rate

Example Two – Property Trader

Sale price: $180,000
Net purchase price: ($100,000)
Profit: $80,000
Tax deductions – sale costs: ($5,000)
Profit to be shown in ITR as ordinary income: $75,000

As to whether a taxpayer is an investor or a trader, there is a substance over form approach and several tests that the ATO applies. In the majority of cases though, unless you are regularly buying and selling property, most investment property taxpayers will not be traders.

Hope this has helped.

Happy New Year!

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

Properties for sale…??? Are they positive cashflow – if so, on what basis?

An initial deposit of only a few thousand isn’t anything hugely special.

Perhaps outline more information and in the interests of discussion there may be quasi-advertising, but so be it.

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

I moved your post to its correct forum.

Don’t know any of those organisations. As a different course, maybe being a JV money partner might work for you.

You’ll own the property and receive +ve cashflow and someone will do the leg work for you.

Maybe worth thinking about…???…

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

Thanks for your post and welcome to the community!

Your Qld plan doesn’t sound too aggressive to me (yet everyone is different), so I think that you need to perhaps rethink how you can maximise your wealth building opportunity.

Aggressive in my book (for someone in your position) would be to buy the block, renovate the front and subdivide and develop the back.

Of course the risks are higher… but that’s what agressive means!

You’ve done well to be in your position, the real skill now is to think about what made you a success and replicate what you’ve done to upscale your achievements.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

Thanks for your post… I just moved it to the correct forum.

Ah, you have the same issue as many others.

It comes down to distinguishing between an investing decision (buy more property) and a lifestyle decision (dreamhouse).

Furthermore, outside of making money it’s likely that you have not set a goal or reason to invest.

This being the case, if you sold (or refinanced the equity) in the property and invested elsewhere, what would you buy? I think it’s important to work through this question in order to understand the risk:reward before you.

You’ll need to prioritise in your own mind which you want more… the dream house or the possibilty of building wealth via investing.

Personally, I choose the investing option and delayed gratification so that I could have the dream house and not have to work later.

As for the numbers, your property will be -vely geared, so while the property appreciates in value above the cost of holding it you’ll be infront.

When the market moves sideways or down you’ll be behind. As such, in deciding to sell or keep the property you need to form an opinion about where the market is and what it is likely to do, and then act accordingly.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi Ren,

Thanks for your post and welcome to the community.

Be sure to post both your questions and progress… it won’t be easy, but if you want it bad enough then success will be a matter of choice, not a matter of chance!

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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