CHECKLIST FOR PROPERTY DEVELOPERS …

THERE ARE MANY TYPES OF TAX AND ALL HAVE DIFFERENT IMPLICATIONS … If you are thinking of becoming a property developer, or already in developments, here is a checklist to approach your accountant with. There are many types of taxes and all have different implications depending on your particular situation.

The best time to find out about these things is before you buy, however some may be half way through.

From my experience, I have found CGT, GST, and Land Tax all separate issues that can change during the course of a development, depending on where I generate income in my day to day enterprise activities, whether I am doing the development for a profit, how long you hold the property, what is your intention before you buy, and the list goes on.

Even today, there are GST cases through the Law Courts which are testing the “Margin Scheme” method of applying GST to property development, and after a few appeals, the twists and turns are no clearer as a precendent.

Check out the below issues:

 GST – Property developers are particularly left in limbo between whether or not they are doing a one off development, or are seriously running an enterprise. Whether you are registered for GST or not, you may have to collect GST, and its all down to your particular circumstance.

Margin Scheme may apply, and it all depends if you have registered for GST, if you should and when you should.

Capital Gains Tax – Rather than create income tax from your profitable developments, or if property development is not your business and you just want to subdivide your land that you have held for years, Capital Gains Tax may apply. You may also develop and hold property for 5 years and be exempt from income tax, so CGT may apply in that instance instead – with some large discounts.

 Land Tax – Payable by most developers, however the threshold that discounts the amount payable is not always applicable, especially if you hold the property in a unit trust structure that is described as a fixed trust. That’s an extra $5,000+ onto your expense list.

 Income Tax – Structures

Personal and joint names, Unit Trusts, Discretionary Trusts, Self Managed Super Funds, and companies are some of the ways you can nominate

 If you require any further information or want a referal to an experienced property accountant please contact us