Hi Everyone,
Now I have some advice from the accountant and I am checking this against another accountant. I thought I'd see if there were any helpers who could give me a idea as well.
The question I have is this,
Are you better off pre-selling property in small lots (4 apartments in a FY) or can you sell the whole development off the plan (12 in all) and still pay the same amount of tax? Does it make any difference? This development is about a 2 1/2 year time frame.
I'm just about to market our big bertha deal and I want to make sure it is right tax wise. The property is in a gst registered company which is in the business of property developing.
Thanks in advance.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeHi D,
A company pays tax at a flat rate of 30%, so you would pay the same amount of tax on each sale.
BUT, you don't want to get into a position where you sell all the properties in Year 1, pay the tax and then have a loss in Year 2 (because of expenses relating to the sales) because the loss will just sit in the company until you have more income to offset.
But to answer your question, a company pays a flat rate of 30% regardless of the size of the profit.
You don’t realise the income until settlement of each unit, so you will have claimed much of your gst etc well prior to sale.
Ta Scott,
I was curious after another person told me 'no, don't sell everything at once'. I couldn't work out why apart from what Dan mentioned above. 30% is still that whether you sell them this year or the next or the next.
Thanks again guys.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email Meit Then comes down to how you distribute the profit from the company.
Cheers Scott,
I'll have to check this with accountant man, but if you are distributing out you pay tax on the amount you have taken over that year (I don't know what the current brackets are) but for instance up to $180k still pay 38% on that amount. So you could distrubute to an individual/s over a period of time to take the profits if necessary. Pay tax twice?
I'm looking for the right questions to ask so I get the right info. People seem to only give out the info they think you want rather than what you actually need
Thanks,
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeDistributing to the shareholders of a company is done by way of dividend. If the company has paid tax in previous years, then the shareholders get a franking credit on their dividend.
ie – shareholder gets a dividend of $70,000 fully franked. The franking credit os 3/7ths of the dividend, or $30,000 in this case.
In your (shareholders) tax return, you have income of $100,000 (70k + 30k) with a franking credit, or tax credit of $30,000.
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