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Leo T.
Leo T.
Hamilton, NSW
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0 Followers

About to complete our first development of 4 units and so far have sold three and thinking of keeping one. Our question is do we have to pay CGT on the unit we keep… how does it work?

3 months ago

Responses

Hi Leo,

Please confirm with your accountant. However, you only pay CGT when you sell something for a gain. So if you don’t sell it, there is no CGT to pay.

All the best.
James

Hi Leo,
As James has said you would only pay CGT if you sell. A lot depends on the structure of the entity that developed the block. If you need to transfer the property between entities or to an individual director then a sale has taken place.
Definitely talk to your accountant and get the ducks in a row, it may save you thousands
Cheers
Scott

Hi Leo,

Everything lies in the detail. But in general you are only liable for CGT on disposal. It depends on what you mean by "keeping one".......what you need to have a clear picture of is what your CURRENT structure is that is doing the development (are you doing this through a trust or off your own bat?) and who is ultimately going to hold the property.

Other issues that might also need to be sorted out include the GST ramifications of what you are doing, and perhaps even the possibility that the ATO might determine that you are in the business of "developing property" and hence the sales are not CGT events at all.....and the proceeds are simply ordinary income from the business of property developing.

Sooooo, if you dont already have one, I strong suggest you get in front of a GOOD accountant. You need to have all your answers sorted before the ATO starts asking questions!!!

I suggest someone with the letters CA or CPA after their names......and perhaps your best way to find one is through conversations with friends, family and colleagues who have had similar issues (ie property development) previously.

good luck
BC

Comments

Leo,

Can't agree more with BC's comments here. These questions should have been considered/asked before going into the development process.

From my experience, I'd suggest that yes - CGT on the property you hold onto (but check the structure for holding this long-term) when eventually sold.
Other properties are likely to be ordinary income (business activity). There is also GST implications to consider - claims for the development, possible margin scheme etc.

Please speak with an accountant that has experience with these - there are costly mistakes if you get it wrong.

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