All Topics / Creative Investing / Instalment Contract Tax Considerations

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  • Profile photo of AdamAdam
    Join Date: 2015
    Post Count: 1

    Hi Everybody,

    I am considering purchasing a property via an Instalment Contract and was just wondering if anybody knows how the ATO will treat the payments?
    As a simplified example the purchase price would be $100,000 in ten equal payments of $10,000 per year with no interest complications.
    I know that if I rent the property and receive $5,000 per year that is classed as Income by the ATO.
    But what I need to know is the $10,000 per year payment classified as capital in nature and hence adds to the cost base and not deductible against the income?


    David Thiu
    Join Date: 2017
    Post Count: 75

    Hi Adam,

    Based on the information from the Sciacci Course, income earned from an Instalment contract is treated as ‘Income from a Business’ and is taxable at the time you receive it.

    Hope that helps,



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

    That is capital because it is payment for the property. Any interest component?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide)

    Profile photo of David SiacciDavid Siacci
    Join Date: 2014
    Post Count: 17

    If your buying then the tax is not your issue
    However, for the seller it will be assessed according to the contract date, unless its his primary place of residence which means the money is exempt.
    If its not his PPR then it will attract the tax on the whole amount accordingly unless they are in the business of Vendor Finance, then its taxed as it comes in.
    As always clarify this with your accountant and or solicitor as this may be out dated now as things change regularly…

Viewing 4 posts - 1 through 4 (of 4 total)

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