Am I a trader?
Question from Angela updated on 4th February 2015:
I have a total of five properties now, four of them are rental properties. I normally just buy and hold. I have heard that if I own more than five properties, I have to become a trader. That I have to form a company using different tax rules. Is this right? Thank you and kind regards.
Our expert Mark Withers responded:
The number of properties you hold does not determine your status as a trader. A property trader is somebody who is in the business of dealing in land or developing land with a view to generating profit on the sale of land. Gains in relation to these activities are taxable and generally also subject to GST when conducted continuously and regularly. Note also, that even without being in the business of land dealing, gains made on the sale of property purchased with an intention to resell are also taxable. If properties though are acquired with the intention to derive rental income from them and no intention to sell the property exists at the time of acquisition the gains remain free of income tax. Remember, the burden of proof rests with the taxpayer.
Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.