All Topics / Legal & Accounting / CGT – 50% discount when buying land and building

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  • Profile photo of Matt McLeanMatt McLean
    Participant
    @matt-mclean1
    Join Date: 2015
    Post Count: 4

    Hi All,

    I’ve got a few different answers to this question so putting it to you guys.

    If you purchase land and build a dwelling and then sell for a profit once completed – when does the 12 months (for 50% CGT discount) start? It is from the Contract / Settlement date on the land, or when Construction is finished / the house is rented?

    Cheers,

    Matt.

    Matt McLean | Rams Home Loans
    Email Me

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    contract date for the land generally.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Matt McLeanMatt McLean
    Participant
    @matt-mclean1
    Join Date: 2015
    Post Count: 4

    Thanks Terry. Does the ATO scrutinise your ‘intention’ closely? I’ve been told if your intention is to build and sell for a profit then the 50% discount may not be applicable. If you build with the intention of renting but change your mind as soon as its completed and sign a contract to sell (more than 12 months after signing the land contract) you will remain eligible for the discount?

    Matt McLean | Rams Home Loans
    Email Me

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Yes. But not just intention, but the events themselves. So if you intended to buy land construct and sell then this would probably not be taxed as a capital gain, but income. If you can demonstrate you intended to hold, and took steps too, but circumstances changed, then it might be taxed as a capital gain.

    Don’t forget GST too.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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